Buyers around the world are asking about South Korean diesel as the Middle East crisis tightens supply, the Kyunghyang Shinmun reported. But the government has capped petroleum product exports for seven months, leaving refiners unable to seize the opportunity.
The Kyunghyang Shinmun reported on Oct. 13 that countries are inquiring about buying South Korean diesel amid a worldwide shortage. The paper named Korea and India as the countries that can currently produce diesel without disruption. As the Middle East crisis drags on, calls are growing, mainly from industry, for more flexible use of the export restrictions in place since March.
광고 문의 · 300×250Prices show the strain. Citing Reuters and others, the Kyunghyang Shinmun said December Brent futures on London's ICE exchange rose 1.84% on Oct. 12 to $106.55 a barrel, the highest since Sept. 15. Diesel on the Singapore wholesale benchmark (MOPS) stood at $92.90 a barrel on Feb. 27, just before the Middle East war began, and reached $168.19 on the 12th, a rise of about 81%. A refining official explained that diesel takes the biggest hit when crude prices climb.
The paper pointed to a changed supply picture behind Korea's appeal. Many refineries in Saudi Arabia and elsewhere in the Middle East have been destroyed, and Russia, which accounts for about 12% of world diesel exports, is struggling to operate because of the war in Ukraine. Korea, by contrast, has settled into a policy of diversifying crude sources to the United States and North Africa and has the world's fifth-largest refining capacity. It also noted that SK Earthon began crude production at a Vietnamese block late last month.
Output has recovered, but exports remain tied
Citing Korea National Oil Corporation's Petronet data, the Kyunghyang Shinmun said domestic diesel output fell from 31.028 million barrels in January to 22.849 million in April, when the Strait of Hormuz blockade limited crude supplies. It recovered to 28.26 million in July and 30.561 million in August, returning to the 30-million range. Production that fell after the war began is thus effectively back to its prewar level.
Exports have nonetheless not been freed. When the government introduced the first petroleum price cap on March 13, it imposed export limits at the same time: monthly exports of gasoline, diesel and kerosene are held to within 100% of the same month a year earlier, and domestic shipments must stay at 90% or more. Diesel is under special management because of heavy livelihood demand from truckers, parcel couriers, farmers and fishers.
Refiners want relief. One industry official told the Kyunghyang Shinmun that even supplying the domestic market at maximum there is surplus volume. The argument is that companies need a chance to recoup losses caused by the price cap. A government official, however, said the Middle East situation is worsening and the diesel export curbs cannot be lifted easily, warning that ending the cap now could push diesel to 2,600 to 2,700 won per liter.
The dispute comes down to balancing household livelihoods against export opportunity. With international diesel prices far above the domestic ceiling, export limits act as an opportunity cost for refiners, while the government puts inflation and livelihood burdens first. Until the Middle East settles, the gap is unlikely to close easily, and whether a compromise that modestly adjusts the permitted export ratio is discussed will be the thing to watch.
