Korea promises ‘highest priority supply’ amidst war in the Middle East and blockade of Hormuz… Is this a signal for a reorganization of the energy supply chain?

Article 38 of the United Nations Convention on the Law of the Sea (UNCLOS) guarantees the right of transit passage in international straits.

The Strait of Hormuz is also an international strait.

However, in real situations, legal rights are substantially limited by factors such as:

This is a structural problem that cannot be solved by increasing production, and it is difficult to normalize supply unless stability in the Strait of Hormuz is secured.

Korea has a structure that relies on the Middle East for about 69% of its total crude oil imports, Saudi Arabia is the largest crude oil supplier, and Qatar is a key country in LNG supply.

This structure isA strategic market that continues to generate stable and large-scale demandIt means.

In particular, for oil producing countries in the Middle East, it is very important to maintain a fixed source of demand such as Korea because the stability of demand is directly related to financial stability.

Therefore, the expression ‘highest priority supply’ is interpreted to mean making priorities clear in situations where supply capacity is limited.

The Korean oil refining industry has the ability to convert heavy oil from the Middle East, which has a high sulfur content and is highly refining difficult, into high value-added petroleum products through advanced facilities.

This is in the global energy supply chain.Acts as a processing and redistribution hubIt means to perform .

In fact, about 68.6% of U.S. aviation fuel imports come from Korea, and Australia also relies on Korea for about 25% of its petroleum product imports.

This structure is a factor that causes oil-producing countries in the Middle East to recognize Korea as a key partner connected to the global market.

If Korean oil refineries change their crude oil import structure to focus on light oil such as North Sea Brent crude or U.S. WTI through facility conversion in the future, demand for Middle Eastern crude oil may structurally decrease.

This is an important risk that directly leads to a decline in the market share of oil-producing countries in the Middle East.

Therefore, this ‘priority supply’ declaration goes beyond guaranteeing supply.Strategic measures to prevent the possibility of departure from Korea's supply chain and maintain long-term business relationshipsIt is reasonable to view it as

In other words, this is not consideration in a crisis situation.Active demand management strategy to maintain market dominanceno see.

The most important feature of this situation is that rising energy prices and logistics disruptions are occurring simultaneously.

Rising oil prices lead to an increase in the cost of electricity and gas as well as oil refining and petrochemicals, which directly increases the cost burden of major manufacturing industries such as steel, chemicals, and semiconductors.

In addition, the schedule for crude oil introduction itself is becoming uncertain due to delays in transit through the Strait of Hormuz, and increased vessel retention and route avoidance are leading to increased freight rates.

As a result, companies are faced with the risk of delivery delays, production disruptions, and contract defaults at the same time.

In particular, this crisis has the characteristic that a large risk gap between companies can occur depending on inventory management and logistics strategies because transportation is limited even though supply exists.