Possible impact of Iranian oil sanctions on Korean economy
- 5 years ago
이란산 원유 수입 전면중단 돌입...한국에 미치는 영향은?
The six month waiver on Iranian oil imports on a number of countries, including Korea, ended as of today, May 2nd.
We now take a look at the impact it could have on the Korean economy and the outlook of global oil prices.
Here’s Arirang’s senior economics correspondent, Kim Hye-sung.
Korea has gradually lowered its dependence on Iranian oil imports in case the U.S. decides to strengthen sanctions to a complete ban.
In 2017, Iranian crude accounted for 13 percent of Korea's total oil imports.
That fell more than half to five percent last year.
But Korea is still the second-largest buyer of Iranian oil, just after China as the local petrochemical industry relies heavily on Iranian condensate oil, and local petrochemical companies have imported over 20 million barrels as of March.
An ultra-light form of crude oil, condensate is used to produce naphtha, the basic raw material for petrochemical products like plastic.
"Korean petrochemical companies can replace Iranian condensate oil with oil from the U.S., but it is more expensive and the oil features lower purity. Export prices would go up but profitability would go down. The local aviation industry will also be negatively affected."
Oil has rallied about 40 percent this year on an OPEC deal to cut supply and due to the political crisis in Venezuela and has hit a six-month high recently.
If Iranian oil exports of 1 million barrels a day are wiped out, restricting supply and pushing prices upward, local industries including auto and electronics will be heavily affected to to higher raw material costs.
A study by Hyundai Research Institute showed that if oil prices rise to 70 dollars a barrel, consumption and investment will decrease, driving down GDP growth by zero-point-six percent.
"Consumers will also likely feel the rise in oil prices. Starting next Tuesday, Korea's fuel tax cut -that had been in place for around 6 months - will be slashed from 15 percent to seven percent. The move will drive up gasoline prices by over six cents a liter."
The Ministry of Economy and Finance said earlier this week it will provide discounts to gas stations and help companies diversify oil imports.
Overall, the impact of the Iranian oil import ban on the local economy will depend on whether the U.S. and OPEC countries like Saudi Arabia can provide enough oil and keep prices stable.
Kim Hyesung, Arirang News.
The six month waiver on Iranian oil imports on a number of countries, including Korea, ended as of today, May 2nd.
We now take a look at the impact it could have on the Korean economy and the outlook of global oil prices.
Here’s Arirang’s senior economics correspondent, Kim Hye-sung.
Korea has gradually lowered its dependence on Iranian oil imports in case the U.S. decides to strengthen sanctions to a complete ban.
In 2017, Iranian crude accounted for 13 percent of Korea's total oil imports.
That fell more than half to five percent last year.
But Korea is still the second-largest buyer of Iranian oil, just after China as the local petrochemical industry relies heavily on Iranian condensate oil, and local petrochemical companies have imported over 20 million barrels as of March.
An ultra-light form of crude oil, condensate is used to produce naphtha, the basic raw material for petrochemical products like plastic.
"Korean petrochemical companies can replace Iranian condensate oil with oil from the U.S., but it is more expensive and the oil features lower purity. Export prices would go up but profitability would go down. The local aviation industry will also be negatively affected."
Oil has rallied about 40 percent this year on an OPEC deal to cut supply and due to the political crisis in Venezuela and has hit a six-month high recently.
If Iranian oil exports of 1 million barrels a day are wiped out, restricting supply and pushing prices upward, local industries including auto and electronics will be heavily affected to to higher raw material costs.
A study by Hyundai Research Institute showed that if oil prices rise to 70 dollars a barrel, consumption and investment will decrease, driving down GDP growth by zero-point-six percent.
"Consumers will also likely feel the rise in oil prices. Starting next Tuesday, Korea's fuel tax cut -that had been in place for around 6 months - will be slashed from 15 percent to seven percent. The move will drive up gasoline prices by over six cents a liter."
The Ministry of Economy and Finance said earlier this week it will provide discounts to gas stations and help companies diversify oil imports.
Overall, the impact of the Iranian oil import ban on the local economy will depend on whether the U.S. and OPEC countries like Saudi Arabia can provide enough oil and keep prices stable.
Kim Hyesung, Arirang News.