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:

Comprehensive energy news coverage, updated nonstop

8.25$/month*

*billed annually at 99$/year for the first year then 149,00$/year ​

Unlimited access • Archives included • Professional invoice

OTHER ACCESS OPTIONS

7-Day Pass

Up to 50 articles accessible for 7 days, with no automatic renewal

3 $/week*

FREE ACCOUNT

3 articles/month

FREE

*Prices are excluding VAT, which may vary depending on your location or professional status

Since 2021: 30,000 articles • 150+ analyses per week

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 State Duma has approved Russia’s formal withdrawal from a treaty signed with the United States on the elimination of military-grade plutonium, ending over two decades of strategic nuclear cooperation.
Polish Prime Minister Donald Tusk said it was not in Poland’s interest to extradite to Germany a Ukrainian citizen suspected of taking part in the explosions that damaged the Nord Stream gas pipelines in 2022.
Al-Harfi and SCLCO signed agreements with Syrian authorities to develop solar and wind capacity, amid an ongoing energy rapprochement between Riyadh and Damascus.
Faced with risks to Middle Eastern supply chains, Thai and Japanese refiners are turning to US crude, backed by tariff incentives and strategies aligned with ongoing bilateral trade discussions.
France intercepted a tanker linked to Russian exports, prompting Emmanuel Macron to call for a coordinated European response to hinder vessels bypassing oil sanctions.
The activation of the snapback mechanism reinstates all UN sanctions on Iran, directly affecting the defence, financial and maritime trade sectors.
Commissioner Dan Jørgensen visits Greenland to expand energy ties with the European Union, amid plans to double EU funding for the 2028–2034 period.
European and Iranian foreign ministers meet in New York to try to prevent the reinstatement of UN sanctions linked to Tehran’s nuclear programme.
Canadian Prime Minister Mark Carney announces a bilateral agreement with Mexico including targeted investments in energy corridors, logistics infrastructure and cross-border security.
The US president has called for an immediate end to Russian oil imports by NATO countries, denouncing a strategic contradiction as sanctions against Moscow are being considered.
Tehran withdrew a resolution denouncing attacks on its nuclear facilities, citing US pressure on IAEA members who feared suspension of Washington’s voluntary contributions.
Poland’s energy minister calls on European Union member states to collectively commit to halting Russian oil purchases within two years, citing increasing geopolitical risks.
Athens and Tripoli engage in a negotiation process to define their exclusive economic zones in the Mediterranean, amid geopolitical tensions and underwater energy stakes.
European powers demand concrete steps from Tehran on nuclear issue or United Nations sanctions will be reinstated, as IAEA inspections remain blocked and tensions with Washington persist.
Brussels confirms its target to end all Russian energy imports by 2028, despite growing diplomatic pressure from Washington amid the ongoing conflict in Ukraine.
Donald Trump threatens to escalate US sanctions against Russia, but only if NATO member states stop all Russian oil imports, which remain active via certain pipelines.
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.

All the latest energy news, all the time

8.25$/month*

*billed annually at 99$/year for the first year then 149,00$/year ​

Unlimited access - Archives included - Pro invoice

7 DAY PASS

Up to 50 items can be consulted for 7 days,
without automatic renewal

3$/week*

*Prices shown are exclusive of VAT, which may vary according to your location or professional status.

Since 2021: 30,000 articles - +150 analyses/week.