International oil prices have surged past $90 per barrel for the first time in over a month as tensions between the United States and Iran escalate. Despite the government and oil industry securing crude oil imports for July and August, experts believe there is a low likelihood of domestic supply issues in the short term. However, concerns are growing that prolonged disruptions in the Strait of Hormuz could lead to increased supply uncertainty after September.
Brent Crude Surpasses $90 for the First Time in Over a Month
According to Investing.com, as of 2 p.m. on July 20, the benchmark for global oil prices, Brent crude for September delivery, was trading at $90.24 per barrel, up 2.43% from the previous trading day. Earlier in the day, it reached $90.95 before retracting some gains, marking a return to the $90 level for the first time since June 11.
At the same time, West Texas Intermediate (WTI) crude for August delivery rose 2.13% to $83.50 per barrel, the highest level since June 12.
International oil prices have shown a sharp rebound recently. According to the Korea National Oil Corporation's Petronet, Brent crude prices in the third week of July averaged $85.06 per barrel, while WTI averaged $79.70, reflecting increases of 9.77% and 8.50%, respectively, from the previous week.
The renewed escalation of U.S.-Iran tensions has contributed to this price surge. The U.S. continues its military actions against Iran while imposing a maritime blockade on Iranian ports. In response, Iran has threatened to attack vessels that violate navigation regulations in the Strait of Hormuz, raising fears of disruptions in oil transportation. The Strait of Hormuz is a critical passageway for approximately 20% of the world's oil trade.
September Supply Uncertainty and Price Control Strategy in Question
The main concern now is the remaining supply for September and subsequent imports. If the U.S.-Iran conflict continues, the prices for crude oil, shipping, and vessel insurance could all rise during the contracting process for remaining supplies. If tanker traffic is again restricted, even the crude oil already secured may not arrive in South Korea as scheduled.
The global oil market, which had been showing signs of recovery, now faces the risk of renewed shocks. According to the International Energy Agency's July oil market report, total oil exports from the Gulf region reached 16.1 million barrels per day last month, an increase of 6.5 million barrels from the previous month. However, this figure still falls short of the pre-Middle East conflict level of 24 million barrels per day. A significant decline in tanker traffic through the Strait of Hormuz could reverse the recovery trend in Gulf region exports.
Domestically, oil product prices continue to decline. According to the Korea National Oil Corporation's Opinet, as of 3 p.m. on July 20, the national average gasoline price was 1,873.16 won per liter, down 0.22 won from the previous day. Diesel prices also fell by 0.07 won to 1,857.61 won. The effects of the seventh oil price control measure, which lowered the supply price cap for gasoline to 1,784 won and diesel to 1,773 won, are being reflected with a lag since it was implemented on June 27.
However, the recent surge in international oil prices complicates the exit strategy for the price control measures. The Ministry of Industry plans to announce the eighth price cap on July 24. Maintaining current prices could widen the gap between the actual costs for refiners and the supply price cap, increasing the government's financial burden. Conversely, raising the price cap could stimulate fuel prices at gas stations and consumer prices, which have stabilized.
The government has allocated 4.2 trillion won for loss compensation, assuming the price control measures will be in place for six months. The refining industry estimates cumulative losses to be around 4 trillion won. However, the government maintains that there is a discrepancy between the international oil product price standards applied by the industry and the actual cost standards.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.