As Iran’s war disrupts imports of crude oil, liquefied natural gas (LNG) and other critical energy supplies, experts are cautiously warning that Korea could confront a full-blown energy crisis as early as late April.

With the Strait of Hormuz effectively sealed for nearly three weeks to date, Korea’s oil refiners — which depend on the Middle East for roughly 70 percent of their crude — say their operational endurance may not exceed two months. The shortages of naphtha have already begun to bite in the petrochemical sector, forcing companies to sharply curtail utilization rates in a bid to conserve dwindling feedstock.

Some chemical firms have already cut production or shut down plants temporarily, adopting a defensive stance to endure the mounting supply crisis.

While the government cites reserves sufficient for seven months, that figure reflects an extreme, all-inclusive accounting,” said a source at a major Korean oil refiner. “We can hold out for perhaps two months, and by late April, if there doesn’t look to be any clear solution, the impact will become unmistakable, and we may be forced to scale back plant operations in earnest.”

Korea currently holds roughly 190 million barrels in oil reserves, where the government states that Korea can sustain for up to 208 days. But this calculation was made without considering the exports; domestic refiners exported 485.35 million barrels last year, or some 51.9 percent of total crude imports.

When exports are factored in, daily oil demand rises to roughly 2.8 million barrels, reducing the effective lifespan of existing reserves to just 68 days.

West Texas Intermediate crude stood at $99.98 a barrel as of Monday at 7 a.m., a 49.2 percent surge from Feb. 27, while Brent crude climbed 56.6 percent over the same period to $113.5 a barrel.

“The price spread between Dubai crude and other benchmarks had widened to near-historic levels, meaning that the closure of the Strait of Hormuz has been directly priced into Dubai spot cargoes,” said Yang Ki-wook, director general of the Office of Industry, Trade and Resource Security at the Ministry of Trade, Industry and Resources Monday morning at the Sejong government complex, adding that the recent pace of increase “far outstrips that observed during the Russia-Ukraine war.”

The disruption is particularly acute for Korea, where roughly 99 percent of crude imports from the Middle East transit the Strait of Hormuz — a narrow but indispensable artery of global energy trade. Despite stretching just 90 miles in length and narrowing to 21 miles at its tightest point, the waterway serves as the sole maritime gateway connecting the Persian Gulf to the Indian Ocean. Each year, about 26 percent of the world’s crude oil and 23 percent of its liquefied natural gas shipments pass through the strait.

“Given that Israel has begun to signal the possibility of a ceasefire, there is reason to expect a window for stabilization by the end of March,” said Lee Kwon-hyung, a senior research fellow specializing in the Middle East at the Korea Institute for International Economic Policy.

“If that fails, by late April the refining and petrochemical industries will begin to feel direct strain, with disruptions likely cascading into the production of vinyl and other plastic goods.

Naphtha — a critical feedstock underpinning a vast downstream ecosystem spanning plastics, automobiles and electronics — poses an even more acute challenge.

With the closure of the Strait of Hormuz effectively severing supply, naphtha prices have surged to more than $1,100 a barrel, nearly doubling from the previous levels of around $600. Industry inventories are perilously thin, averaging just two to three weeks of supply.

LG Chem has halted operations at its No. 2 plant in the Yeosu National Industrial Complex, which has an annual capacity of 800,000 tons.

Lotte Chemical has moved up its regularly scheduled turnaround maintenance by about three weeks, now set to begin on April 18, which is seen as a direct response to naphtha supply disruptions and brings forward the shutdown period.

“Refiners likely have around 100 days’ worth of reserves, though some of that may already have been drawn down. At this rate, by late April the impact will begin to register directly, tipping into an energy crisis,” said Chang Tae-hun of the Korea Energy Economics Institute.

“The only viable structural solution at this point is to expand equity investments in overseas oil production. Securing upstream stakes and diversifying supply chains is imperative,” Chang added.

LNG is also under mounting strain as Iran attacked Qatar’s LNG facilities, which could invoke force majeure on long-term supply contracts with Korea, potentially suspending deliveries for up to five years. Qatar accounts for roughly 14 percent of Korea’s LNG imports per year.

However, the Korean government has projected confidence that the crisis can be contained through strategic reserves and alternative sourcing.

Yang dismissed the “April crisis” scenario, saying, “We plan to begin releasing oil reserves by mid-April, while additional cargoes from the United Arab Emirates are scheduled to arrive starting in April.”

Yang also added that more than half of the country’s naphtha supply is derived from domestic refiners, so “if refiners redirect exports toward local petrochemical firms, that alone could help stabilize the situation.”

The Korean government is also pushing to import Russian and Iranian crude and naphtha on sea after Washington temporarily lifted sanctions on the imports.

U.S. Treasury Secretary Scott Bessent defended the measure by saying that it could benefit the United States by preventing Iranian oil from flowing to China at a discounted price, rather than going to allies such as Japan and Korea.

Still, skepticism persists over whether Seoul can secure sufficient alternative supplies.

While imports from the United States, Mexico, Canada, Australia and Southeast Asia are being considered, volumes remain limited and their utility comparatively constrained compared to Middle Eastern grades. The operational compatibility still remains questionable as the U.S. crude is light, whereas Korea’s refining infrastructure is calibrated for heavier Middle Eastern crude.

Imports from Russian floating storage present their own challenges, with concerns over quality further dampening their appeal. Should these constraints endure, the burden is likely to be passed along the value chain — and ultimately to consumers.

The Korea Institute for Industrial Economics and Trade said in a report that if the Strait of Hormuz remains blocked for more than three months, “LNG prices could surge by as much as 200 percent.”

“The most immediate impact will be an inflationary shock driven by a broad-based rise in production costs — from electricity tariffs and petrochemical input prices to logistics and import costs,” researcher Lee said. “If this converges with a contraction in consumption, it could raise the specter of stagflation,” adding that disruptions to fertilizer imports could also spill over into the agriculture sector.
Source: Korea JoongAng Daily