'Driving Season' Also Fails to Boost... Domestic Petroleum Consumption Declines in July

[Asia Economy Reporter Hwang Yoon-joo] This year, due to an unusually long rainy season and the impact of the novel coronavirus disease (COVID-19), domestic petroleum consumption, including diesel and aviation fuel, has been sluggish even during the 'driving season.' Contrary to expectations that petroleum consumption would increase from the summer vacation season through Chuseok, domestic petroleum consumption in July decreased by more than 7% compared to the same month last year.

According to the Korea National Oil Corporation on the 31st, petroleum consumption in July this year was 73.1 million barrels, down 7.3% from 78.93 million barrels in the same period last year.

Specifically, consumption of diesel (13.52 million barrels) and aviation fuel (1.95 million barrels) fell by 4.5% and 36.8%, respectively, pulling down overall petroleum consumption. Consumption of naphtha, a raw material for chemicals such as plastics, also decreased by 9.5%, from 38.91 million barrels to 35.19 million barrels.

The refining industry refers to the period from the end of May to September as the 'driving season.' This nickname comes from the fact that gasoline consumption in the United States increases during this time, accounting for half of the global usage. Domestically, the 'driving season' is considered to be from the summer vacation period (July to August) through Chuseok. It is a time when consumption of petroleum products, mainly transportation fuels such as gasoline, diesel, and aviation fuel, increases.

However, the consensus in the refining industry is that there is no 'driving season' this year. A refining industry official said, "Not to mention aviation fuel, even the diesel spread (the price difference between crude oil and diesel), which was used industrially this year, is not favorable," adding, "There are concerns that petroleum consumption recovery may be out of reach due to the implementation of social distancing level 2.5."

In response, SK Innovation plans to maintain its facility operating rate at 80-85% in the third quarter. This decision is based on the judgment that there is no reason to increase the operating rate unless petroleum consumption rises significantly. Initially, there were plans to gradually increase the operating rate starting from the 'driving season,' but due to concerns over the resurgence of COVID-19, it has become difficult to make long-term forecasts. In fact, the refining industry estimates that gasoline consumption in Daegu and Gyeongbuk decreased by 30-40% in March, when the COVID-19 crisis peaked this year. The industry expects that consumption contraction due to the resurgence of COVID-19 will be less severe in the Seoul metropolitan area, given its larger economic scale.

A refining industry official said, "We expected domestic demand to increase as overseas travel became difficult, but due to the rainy season, gasoline consumption only slightly increased," and added, "With the implementation of social distancing level 2.5, we expect consumption in the Seoul metropolitan area to decrease further in the future."

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