Domestic Oil Consumption Hits 5-Year Low Last Year... Aviation Fuel Consumption Drops 44%

Crisis in the Oil Refining Industry Due to Shift to Eco-Friendly Policies Including Electric Vehicles

[Asia Economy Reporter Jang Sehee] Due to the impact of COVID-19, domestic oil consumption in South Korea last year hit its lowest level in five years. Although oil consumption is showing signs of recovery with vaccine distribution and global economic recovery, there are concerns that accelerated eco-friendly policies could hinder long-term demand recovery.

According to PetroNet, the oil information site of the Korea National Oil Corporation, domestic oil consumption last year, when COVID-19 broke out, was 878.11 million barrels, a 5.8% decrease compared to the previous year.

In particular, due to travel restrictions, domestic aviation fuel consumption last year dropped by as much as 44% to 21.78 million barrels compared to the previous year.

Oil consumption has been showing a recovery trend since the beginning of this year. According to statistics compiled so far for January and February, January recorded 75.81 million barrels, and February recorded 72.41 million barrels. Compared to the previous year, January consumption decreased by 6.3%, but February consumption recovered to the same level as the previous year.

Although aviation fuel consumption is still less than half of the previous year, demand for other products such as gasoline and naphtha is close to previous levels.

Thanks to the recovery trend in consumption continuing since the end of last year, the four domestic refining companies are expected to simultaneously return to profitability in the first quarter.

The refining industry expects that oil consumption has been recovering this year, and with refining margins and oil price increases, as well as supply shortages caused by natural disasters, performance will improve this year.

Meanwhile, according to the Korea Energy Economics Institute, due to the transition to hydrogen and electric vehicles, oil demand is expected to decrease by an average of 0.4% annually after 2025, reaching about 869 million barrels by 2040.