South Korean oil refining companies imported 14.78 million barrels of crude oil from the United States and 11.03 million barrels of crude oil from Kuwait last month, when the former exceeded the latter for the first time in history. Their crude oil imports from Saudi Arabia added up to 24.7 million barrels during the same period.
Korea's crude oil imports from the United States almost tripled in one year from 5.37 million barrels. In addition, the value of the imports reached an all-time high of US$982.9 million.
This can be attributed to a decrease in the price of American crude oil led by shale oil development. As of July 1, the per-barrel WTI and Dubai crude oil prices were US$59.09 and US$65.06, respectively. This difference has been maintained this month as well.
American crude oil has a low sulfur content, which means its added value is high. Also, it can add to the companies’ profitability when mixed with cheaper Latin American crude oil, which is mainly heavy crude oil. Moreover, the ongoing trade disputes between the United States and China has led to a decrease in China’s American crude oil imports and a continuous oversupply.
Tax benefits applied to American crude oil are another reason for the increase. At present, a 3 percent tariff is applied to crude oil from the Middle East whereas no tariff is imposed on American crude oil in accordance with the KORUS FTA. In addition, the South Korean government gives a refund of 16 won per liter to non-Middle East crude oil importers in the interest of import source diversification.
SK Innovation is relatively more aggressive in importing crude oil from the United States. The company is using very large crude carriers (VLCCs) to import the oil via the Cape of Good Hope sea route. This means it is enjoying a stable supply with tensions between the United States and Iran escalating in the Strait of Hormuz region, through which Middle East crude oil is transported.
On the other hand, S-Oil and Hyundai Oilbank are more passive in that Saudi Aramco is the largest shareholder in the former and the second-largest shareholder in the latter. “The United States is currently building oil pipelines between the inland and the western coast for shale oil export and direct import via the Pacific Ocean is expected to become possible next year,” said an industry executive.