Petroleum Industry Forecasts Worst-Ever Performance in History

[Asia Economy Reporter Park So-yeon] SK Energy, GS Caltex, Hyundai Oilbank, and S-Oil, the four domestic refiners, are experiencing a triple crisis due to the demand decline caused by the COVID-19 pandemic, the plunge in international oil prices, and the worsening refining margins continuing since last year.

According to the industry and securities firms on the 26th, the four refiners are expected to record an operating loss exceeding 3 trillion won in the first quarter.

In response to the crisis, refiners have reduced production by lowering plant operating rates by 20-30% from the usual 100%, and are implementing emergency management measures such as salary returns and voluntary retirement, but these self-help efforts alone are insufficient.

Although the government has introduced support measures, they are not enough to provide new momentum to the industry. Previously, the government announced support policies such as deferring petroleum import and sales levies and tariffs, and leasing the Korea National Oil Corporation's surplus storage facilities. Additionally, the National Tax Service announced on the same day that the payment deadlines for transportation, energy, and environmental taxes for the refining industry in April will be deferred for three months until July.

The refining industry has requested expanded tax support, investment incentives, and deregulation, but these requests have not been accepted.

As the fundamentals of the global economy weaken, international oil prices are fluctuating wildly. When international oil prices experience sharp ups and downs, the refining industry faces increased risks. Compared to early this year when international oil prices were above $60 per barrel, prices have plummeted by 70-80%. The West Texas Intermediate (WTI) May contract even recorded a negative price for the first time on the 20th (local time).

The price of Dubai crude, the benchmark for oil imported into Korea, fell below the $20 mark to $17.5 per barrel in the fourth week of this month, down $3.4 from the previous week.

However, WTI closed trading on the 24th (local time) at $16.50 per barrel, up 19.7%, marking a 40% increase over two days. This appears to reflect the shutdown of unprofitable U.S. oil wells and geopolitical tensions.

This content was produced with the assistance of AI translation services.