South Korea’s major oil refiners have reported weakened earnings in the first quarter of this year even while consumers are paying more at the pump.
According to industry sources on Tuesday, domestic gasoline prices averaged 1,570 won ($1.45) per liter this month, hitting their highest levels in nearly three years.
Global oil prices have surged as Russia and the Organization of the Petroleum Exporting Countries (OPEC) extended their production cuts and Venezuela declined its output. The U.S.’s recent withdrawal from the nuclear treaty with Iran has also raised concerns of tightened supply, further pushing up the price of crude.
While retail gas prices have soared, oil refiners’ bottom line from the refinery business has actually deteriorated, data showed.
Korea’s top refiner SK Innovation Co. posted an operating profit of 325 billion won from its refinery sector in the quarter ended March, down 28.3 percent on year and 36.1 percent on quarter.
Hyundai Oilbank Co. delivered a profit of 232.6 billion won, similar to the year-ago period but down by 23.4 percent from the previous quarter. GS Caltex Corp. and S-Oil Corp. saw their refinery earnings fall by 70.5 percent and 66 percent on quarter, respectively.
The poor results across the board were largely attributed to the narrowed refining margin - the difference between the cost of crude oil and the average selling price of refined products. The refining margin in the first quarter was $7.0 per barrel, down from $8.3 in the third quarter and $7.2 in the fourth quarter of last year.
Higher prices of global crude and domestic gas do not automatically translate into bigger profits for refiners, explained an industry official, citing past data. Korea’s all four major refiners recorded a loss in the second quarter of 2012 when gas prices exceeded 2,000 won per liter, he said, while profits surged to trillions when gas prices fell to 1,400-1,500 won in 2015 and 2016.
By Kang Doo-soon and Kim Hyo-jin
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