Why South Koreas Pledge to Buy More US Oil May.jpeg
South Korea, one of the 10 best commercial partners in America, has become one of the most prominent goals in the variable Washington tariff system. After months of rope tightening diplomacy, the United States imposed a 15 % duty on effective Korean imports on August 7-less severe than imposing a 25 % tax in the beginning, but is still painful in the fourth largest economy in Asia. On the other hand, Seoul agreed to increase investment in American projects and pledged to buy US energy products worth $ 100 billion, a deal aimed at alleviating the strike. Seoul has already estimated the effect of a potential tariff, as she expected only 0.9 % growth for 2025 (compared to 1.8 % at the beginning of this year). This would represent the weakest pace of growth since the epidemic in 2020, which confirms how weak the exports of exports in the country in the shocks of the collective tariffs.
However, the energy pledge appears to be more difficult to fulfill it in practice. Washington expects South Korea to increase a dramatically from imports of American crude, but refining refineries throughout the country have gradually turned in this direction for years. According to KPLER data, WTI Midland imports rose from 283,000 B/D in 2020 to 465,000 barrel/D in 2025, with support from favorable conditions under the Bilateral Free Trade Agreement and a freight deduction system in Korea that often makes WTI cheaper than the Middle East. However, any gradual moves from here will be restricted. Korean Korean crude imports have continued in the range of 2.8 to 3 million barrels/D over the past five years, while American sizes, Saudi Arabia and Iraq have risen, and the United Arab Emirates is still rooted in the supply mix. The Kingdom of Saudi Arabia alone handed over 956,000 barrels to Korea in 2025 so far, nearly twice the quantities of any other resource, and despite the sharp decrease in Russian flows after the start of the Ukraine war, the gap has been filled quickly by Middle East producers.
What keeps these flows in place is not only the habit or political geography, but the primary design of the refining system in Korea. WTI is light raw, while very complex South Korean refineries are formed to treat heavier degrees, mostly from the Middle East. The transformation significantly towards us with barrels (and then, towards a lighter product return) will leave parts of these inactivity facilities, erosion of efficiency and profitability. Korea runs five refineries, and each shows the reason for saying diversification from doing it. The largest, Ulsan, whose fully owned by SK Energy, is already mixed with heavier degrees from Iraq, Kuwait and Saudi Arabia to operate it. YEOSU, owned by Chevron, follows a similar pattern, as the increased volumes of WTI are heading with heavier Iraqi barrels. Onsan and Daisan prescriptions, partly owned by Saudi Aramco, with 63 % and 17 % shares, respectively, tend to an overwhelming majority of Arab and medium Arab light, and constitute about 80 % of their raw list. With Saudi interests directly included in the structure of its ownership, i.e. pushing to replace the resistance of American crude faces. Meanwhile, Intech, the smallest colander, struggles to work even with a capacity of 50 % and face the operational restrictions that they do not leave in a position that cannot absorb excess light oil.
Even in refineries that can deal with more WTI, the logical economic basis has weakened. Cruz gives light like WTI more puffs, which is a facing of the petrochemical industry. But the increase in the global supply, fed by Chinese Chinese expansion, has created the abundance of petrochemicals. The margins collapsed, and on August 20, the South Korean petrochemical companies announced a 25 % group reduction of the ability to install on the country. For refineries, fractures have been constantly negative, which means that purchasing more light crude will not only lead to stress colander formations but also risk products that do not contain a profitable market.
The layers above these operational limits are the contractual obligations that link Korea to the Middle East suppliers. Unlike American producers, who mainly sell immediate conditions, Saudi or Iraqi exporters prefer long -term contracts with little flexibility. The failure to raise the agreed folders risk punishment or even termination, a strict policy that reflects the abundance of global demand for their barrels. In practice, this means that Korean bankers cannot simply remove the levels of the Middle East without risks to supply security in order to absorb Washington’s demands, whatever strong diplomatic pressure.
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The tension between politics and market facts became clear in June, when the South Korea Ministry of Trade, Industry and Energy held a meeting with emergency situations with raw importers and liquefied natural gas after the escalation of the Israel and Iran crisis. The government has used the moment of urging filters to diversify away from its deep dependence on the Middle East crude, on the pretext that regional instability emphasized the dangers of excessive dependence. However, this direct warning failed to change behavior: imports continued to flow with an overwhelming majority of the Middle East, with only gradual increases in US sizes.
Currently, Seoul is heading towards an average path, as raw imports raise us on the margin while relying on their heavy degrees established from the Gulf. But the deal, which was concluded under the pressure of the tariff, displays an uncomfortable fact: South Korea cannot meet Washington’s demands without undermining the foundations of the refining system and the petrochemical industry. Severe dependence on Middle East supplies is closed by designing a refinery, contractual obligations, and ownership risk.
South Korea refineries
refinery
ownership
Capacity (kilo by/d)
Ulsan
SK Energy 100 %
840,000
Usu
GS Caltex (GS Energy 50 %, Chevron 50 %)
785,000
Onsan
Saudi Aramco 63.7 %, South Korea government 7.3 %, free float 29 %
669,000
Disan
Hyundai Heavy Industries 74 %, Saudi Aramco 17 %, hyundai motor 4.4 %, others 4.6 %
520,000
Inson
SK Energy 100 %
275,000
This leaves Seoul caught between a rock and a difficult place, pledging to satisfy her most important ally by buying barrels that he cannot fully use, or maintaining the operational logic of his power system and risking more commercial revenge. In practice, the most likely result is that Korean refineries will marginally increase the American purchases, mixing the additional WTI barrels with heavier Middle East, a compromise that secures the balance of the refinery but is no less than Washington’s aspirations. Either way, the accommodation price is high. The South Korean issue is an influential reminder that, as far as politicians seek to force deals, they cannot rewrite the laws and economics of refining.
