A gas station in Seoul on Sunday. [Yonhap]
A gas station in Seoul on Sunday. [Yonhap]

Concerns over crude oil supply are mounting as armed conflict between the United States and Iran over the Strait of Hormuz intensifies, with the first American military fatality reported in the region.

South Korea's refining industry has preemptively secured crude oil import volumes for July and August at more than 100 percent of last year's levels, according to Yonhap and the Ministry of Trade, Industry and Energy on Sunday. September import volumes have been secured at approximately 74 percent.

The government says there are no immediate problems with short-term crude supply, but it is closely monitoring the situation in preparation for a prolonged period of instability in the Middle East. The government and the refining industry are working to stabilize supply by continuing to bring in alternative crude through routes that bypass the Strait of Hormuz.

International oil prices have not surged as sharply as feared. Brent crude futures settled at $82.49 per barrel on Friday, up 4.5 percent — a limited gain compared with the spike above $100 per barrel seen in the early stages of the war in March.

Yang Ki-wook, director general of the Ministry of Trade, Industry and Energy's industrial resource security office, said the market is reacting less sensitively now because it has already been through this before. "In March, an unprecedented crisis hit suddenly and the shock was very severe," he said. "But because this is something we have already experienced, the market is responding with less alarm."

The government said it is not considering raising the crude oil resource security alert level or reinstating the odd-even vehicle driving restriction for now, judging that the emergency response measures already in place for the Middle East war are sufficient.

The government on June 30 lowered the crude oil resource security alert from "Alert" — the third of four levels — to "Caution," the second level. A separate "Caution" alert that had been in effect for natural gas was lifted entirely. As a result, the odd-even vehicle restriction for the public sector and a five-day rotation restriction on public parking lots were both lifted as of July 1.

Supply measures for naphtha and petrochemical products remain in place. The petroleum price cap, introduced March 13 to curb a sharp rise in domestic fuel prices, has now been in effect for more than four months. On June 27, the government lowered the seventh petroleum price cap by 150 won per liter and said it would review ending the system depending on the trajectory of international oil prices.

With international oil prices rising again amid the armed conflict between the US and Iran, however, plans to end the petroleum price cap have been put on hold for now. Yang said the government has no immediate plans to change the crude oil resource security alert level, even as the situation in the Middle East deteriorates with US military casualties reported in the region. "We will continue to monitor the current situation and respond flexibly if there are any changes in crude oil supply conditions," he added.

A gas station in Guro-gu, Seoul. [Yonhap]
A gas station in Guro-gu, Seoul. [Yonhap]

andy@heraldcorp.com