The depreciation of the won worsens South Korean refiners’ losses amidst political turmoil

The decline of the won against the dollar exposes South Korean refiners to significant losses on crude import costs, while the political crisis surrounding martial law undermines investor confidence.

Share:

Gain full professional access to energynews.pro from 4.90€/month.
Designed for decision-makers, with no long-term commitment.

Over 30,000 articles published since 2021.
150 new market analyses every week to decode global energy trends.

Monthly Digital PRO PASS

Immediate Access
4.90€/month*

No commitment – cancel anytime, activation in 2 minutes.

*Special launch offer: 1st month at the indicated price, then 14.90 €/month, no long-term commitment.

Annual Digital PRO Pass

Full Annual Access
99€/year*

To access all of energynews.pro without any limits

*Introductory annual price for year one, automatically renewed at 149.00 €/year from the second year.

The recent depreciation of the South Korean won against the dollar, reaching a multi-year low, is putting pressure on South Korean refiners as settlement costs for imported crude soar. This currency movement arises amid internal political unrest, exacerbating the fragility of the country’s financial markets.

Financial and logistical impacts

South Korea’s four main refiners – SK Innovation, GS Caltex, S-Oil, and Hyundai Oilbank – depend almost entirely on imports for their crude oil needs, making the dollar-won exchange rate a critical factor. According to industry sources, every 10-won increase in the exchange rate results in foreign exchange-related losses of $5 million to $10 million for these companies.

Currently, refiners are receiving shipments of medium-sour Middle Eastern crude that were negotiated months ago, at a time when exchange rates were more favorable. However, the sudden depreciation of the won has significantly inflated final bills. Teams specializing in oil derivatives and currency hedging are struggling to mitigate these unforeseen impacts.

The dollar-won exchange rate climbed to 1,436.26 won during the afternoon session on December 16, according to the Bank of Korea, compared to 1,403.96 won at the beginning of the month. This volatility increases pressure on refining margins, which are already strained by average import costs of $83.96 per barrel over the first ten months of the year, according to Korea National Oil Corp.

Political turmoil

The ongoing political crisis, marked by the declaration of martial law on December 3 and President Yoon Suk-yeol’s resistance to judicial investigation, has shaken investor confidence. Although Yoon’s impeachment was passed by the National Assembly on December 14, slow judicial processes and partial arrests of military and government officials prolong political instability.

Millions of South Korean citizens are demonstrating daily to demand the arrest of the president and his allies. While these protests remain largely peaceful, the perception of political risk undermines the stability of financial markets.

Outlook for the energy sector

Despite the tense political climate, the fundamentals of South Korea’s refining and oil trading industries remain robust. Refiners continue to meet the demands of their clients in Asia and Oceania while fulfilling supply contracts for petroleum products. However, refining margins remain under pressure due to currency volatility and political uncertainty.

Industry professionals hope for a swift resolution to the crisis and the establishment of a new governmental leadership structure. This transition is considered essential for restoring investor confidence and stabilizing South Korea’s financial markets, which are deeply interconnected with global supply chains.

The two countries agreed to develop infrastructure dedicated to liquefied natural gas to strengthen Europe's energy security and boost transatlantic trade.
Ayatollah Ali Khamenei calls for modernising the oil industry and expanding export markets as Tehran faces the possible reactivation of 2015 nuclear deal sanctions.
The Ukrainian president demanded that Slovakia end its imports of Russian crude, offering an alternative supply solution amid ongoing war and growing diplomatic tensions over the Druzhba pipeline.
The United States cuts tariffs on Japanese imports to 15%, while Tokyo launches a massive investment plan targeting American energy, industry, and agriculture.
Brazil’s Cop 30 presidency aims to leverage the Dubai commitments to mobilise public and private actors despite ongoing deadlock in international negotiations.
Brasília has officially begun the process of joining the International Energy Agency, strengthening its strategic position on the global energy stage after years of close cooperation with the Paris-based organisation.
During a meeting in Beijing, Vladimir Putin called on Slovakia to suspend its energy deliveries to Ukraine, citing Ukrainian strikes on Russian energy infrastructure as justification.
Vladimir Putin and Robert Fico met in China to address the war in Ukraine, regional security and energy relations between Russia and Slovakia.
Slovak Prime Minister Robert Fico plans to meet Vladimir Putin in Beijing before receiving Volodymyr Zelensky in Bratislava, marking a diplomatic shift in his relations with Moscow and Kyiv.
The three European powers activate the UN sanctions mechanism against Iran, increasing pressure on the country's oil exports as Tehran maintains high production despite Western measures.
Iran once again authorises the International Atomic Energy Agency to inspect its nuclear sites, following a suspension triggered by a dispute over responsibility for Israeli strikes.
First suspect linked to the Nord Stream pipeline explosions, a Ukrainian citizen challenged by Berlin opposes his judicial transfer from Italy.
Ukrainian drones targeted a nuclear power plant and a Russian oil terminal, increasing pressure on diplomatic talks as Moscow and Kyiv accuse each other of blocking any prospect of negotiation.
A Ukrainian national suspected of coordinating the Nord Stream pipeline sabotage has been apprehended in Italy, reigniting a judicial case with significant geopolitical implications across Europe.
Russia continues hydrocarbon deliveries to India and explores new outlets for liquefied natural gas, amid escalating trade tensions with the United States.
Azerbaijani energy infrastructure targeted in Ukraine raises concerns over the security of gas flows between Baku and Kyiv, just as a new supply agreement has been signed.
The suspension of 1,400 MW of electricity supplied by Iran to Iraq puts pressure on the Iraqi grid, while Tehran records a record 77 GW demand and must balance domestic consumption with regional obligations.
Beijing opposes the possible return of European trio sanctions against Iran, as the nuclear deal deadline approaches and diplomatic tensions rise around Tehran.
The United States plans to collaborate with Pakistan on critical minerals and hydrocarbons, exploring joint ventures and projects in strategic areas such as Balochistan.
Around 80 Russian technical standards for oil and gas have been internationally validated, notably by the United Arab Emirates, Algeria and Oman, according to the Institute of Oil and Gas Technological Initiatives.

Log in to read this article

You'll also have access to a selection of our best content.