"Driving Season" Can't Help Either... Domestic Petroleum Consumption Declines in July (Comprehensive)

[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 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 jet fuel (1.95 million barrels) fell by 4.5% and 36.8%, respectively, pulling down overall petroleum consumption. Diesel is a representative product of transportation fuel but is also used industrially in factories, so its rate of change is relatively small.

Additionally, naphtha consumption, a raw material for chemical products such as plastics, decreased by 9.5%, from 38.91 million barrels to 35.19 million barrels. Other fuels also declined: LPG by 1.6%, kerosene by 12.8%, and bunker C oil by 8.0%. However, gasoline consumption increased by 6.5%, from 6.68 million barrels last year to 7.15 million barrels.

The refining industry refers to the period from late May to September as the 'driving season.' This nickname comes from the increase in gasoline consumption in the United States during this time, which accounts 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, especially transportation fuels such as gasoline, diesel, and jet fuel, increases.

However, the consensus in the refining industry is that there is no 'driving season' this year. A refining industry official said, "Jet fuel consumption is obviously down, and even the diesel spread (the price difference between crude oil and diesel), which is used industrially, is not favorable this year," 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 about 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 dropped 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 explained, "We expected domestic demand to increase due to difficulties in overseas travel, but except for gasoline, most fuels decreased due to the rainy season," adding, "Gasoline consumption increased slightly, but the spread has narrowed since last week, so the impact on profit improvement is minimal."

He continued, "There are concerns that the momentum for petroleum consumption rebound in the second half of the year, which was expected due to the implementation of social distancing level 2.5 amid the resurgence of COVID-19, will fall short of expectations."

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