[Interview] Park Juseon: "Trump Risk and Middle East Instability... Successive Blows Threaten Crude Oil Security"

Refining Facilities Geared to Medium and Light Crudes
Need to Build More Diverse Refining Infrastructure

Budget Gas Stations Entrenching Low-Profit Structure
Bankruptcy Risk for Nearby Stations 2.5 Times Higher

Industrial Power

Park Joosun, chairman of the Korea Petroleum Association, has warned of an energy security crisis stemming from the renewed "Trump risk" and instability in the Middle East, urging a fundamental overhaul of refining infrastructure to diversify crude oil import sources.

In a recent meeting with The Asia Business Daily at the association's office in Yeouido, Seoul, Chairman Park said, "Korea is a country that does not produce a single drop of oil, so it is inevitably sensitive to international affairs," adding, "A series of negative developments, including tariff shocks triggered by Donald Trump and the crisis over a possible blockade of the Strait of Hormuz, are threatening the security of crude oil imports for the refining industry."

Currently, the dependence of the domestic refining industry on Middle Eastern crude stands at about 69%. Chairman Park pointed out the structural vulnerability in which heightened tensions in the Middle East, including Iran, lead directly to sharp increases in oil prices, and said that he is discussing in depth possible response measures in cooperation with the government.

Park Juseon, chairman of the Korea Petroleum Association, is being interviewed at the Korea Petroleum Association in Yeouido, Seoul, on the 12th. Photo by Kang Jinhyung

In particular, Chairman Park cited "changes in refining infrastructure" as a key task for expanding crude oil import sources beyond the Middle East.

He stressed, "Domestic refining facilities are currently geared mainly toward light and medium crude, so there are limits to processing extra-heavy crude from regions such as South America," and added, "Now is the time to transform our infrastructure so that it can refine a wide variety of crude oil types in preparation for the future."

Along with infrastructure improvements, Chairman Park strongly called for policy changes to resolve imbalances in the domestic distribution market and secure future growth engines.

In particular, he called for a complete review of the so-called budget gas station policy. Over the past six years, more than 1,000 general gas stations have closed, while the number of budget gas stations has actually increased, which, according to the analysis, has entrenched a low-profit structure in the industry. Chairman Park pointed out, "Budget gas stations are increasing the exit risk of nearby general gas stations by 2.5 times," and added, "As we enter an energy transition period, we need to revise the current policy that induces excessive competition so that gas stations can switch their business models in a stable manner."

Meanwhile, Chairman Park, who served four terms as a member of the National Assembly and as Deputy Speaker of the National Assembly, succeeded in being reappointed (24th and 25th terms) as chairman for the first time since the association was founded, backed by the strong trust of the refining industry. He plans to leverage his unique political acumen to communicate with the government and the National Assembly and accelerate the resolution of industry issues.

The following is a Q&A with Chairman Park.

-How would you describe the current situation in the refining industry?

▲China and India have been importing Russian crude at prices USD 10 to 14 per barrel lower than Middle Eastern crude, which has worsened the export profitability of domestic refiners. In the first quarter, exports of petroleum products fell by 13%, but refiners then moved to increase volumes, and in the third quarter they recorded the largest quarterly export volume ever.

The operating margin of the refining industry has averaged 1.7% over the past 18 years, falling short of the manufacturing average of 6.5% and the wholesale and retail average of 4.8%. By the third quarter of last year, low oil prices and weak refining margins resulted in a loss of about 860 billion won, but in the fourth quarter, margins recovered due to shutdowns at global refining facilities, improving performance.

-There are claims that the increase in gas station closures is due to budget gas stations. What is your view?

▲According to statistics, there were 10,694 gas stations nationwide at the end of last year, with more than 1,000 closing over the past six years. In contrast, the number of budget gas stations increased by 136 over the same period and now accounts for 12.3% of all gas stations. Experts point out that the effect of budget gas stations is merely to shift producer profits to budget gas stations and then to consumers, and that when the policy budget input is taken into account, the long-term net benefit is actually negative.

Furthermore, budget gas stations increase the exit risk of general gas stations within a 2 km radius by 2.5 times and lock the average operating margin into a low-profit structure of 1.5% to 2%, depriving the petroleum distribution industry of investment capacity. To adapt to carbon neutrality, the petroleum distribution sector also needs a stable business transition, and for this, I believe the current budget gas station policy, which triggers excessive competition, needs to be reconsidered.

Park Joosun, chairman of the Korea Petroleum Association, is giving an interview at the Korea Petroleum Association in Yeouido, Seoul, on the 12th. Photo by Kang Jinhyung

-Industrial electricity rates have been rising sharply. What difficulties is the refining industry facing, and how do you plan to respond?

▲Since 2022, industrial electricity rates have been raised seven times in three years, an increase of about 80%. During the same period, residential and general-use rates rose by 30% to 40%, meaning the increase for industrial users is more than double. In power-intensive industries that operate 24 hours a day, such as semiconductors, steel, petrochemicals, and refining, changes in electricity rates translate directly into production costs and competitiveness. In 2024, the electricity bill burden on domestic refiners amounted to 2.1 trillion won per year, up 1 trillion won in three years.

With sluggish demand and falling refining margins layered on top, it is difficult to absorb this burden through the industry's own efforts alone. The low-carbon biofuel processes and eco-friendly hydrogen production that the refining industry is pursuing consume even more electricity. There are concerns that if the cost burden grows, it could lead to reduced investment and a slowdown in carbon neutrality efforts. Our position is that we need to reform the rate system to reflect industry characteristics and energy transition goals, improve time-of-use pricing structures, and introduce rate schemes that take into account regional power self-sufficiency levels.

-What do you believe you must accomplish during the remainder of your term?

▲During the high oil price phase in 2022, there were calls to impose a windfall tax on the refining industry, but I believe it was fortunate that the debate subsided after we explained the industry's profit structure and the objective circumstances.

We also helped push through amendments to the Petroleum and Alternative Fuel Business Act, laying the groundwork for domestic refiners to produce sustainable aviation fuel (SAF). In 2024, SAF was designated as a new growth source technology, and early last year it was also included as a national strategic technology project. This year, we plan to promote the application of subsidies to encourage domestic production. The United States is providing support of up to USD 1 per gallon, and Japan is offering a corporate tax deduction of 30 yen per liter. Korea is also pursuing the SAF business to maintain its position as the No. 1 exporter of aviation fuel, but high production costs and uncertainty are heavy burdens. Our position is that institutional improvements are needed to secure price competitiveness.

In addition, we plan to push for an exemption from the individual consumption tax on heavy fuel oil used as feedstock, a long-standing goal. Since 66 countries around the world apply tax exemptions to heavy fuel oil used as a raw material, we believe that amending the relevant laws is necessary to reduce greenhouse gas emissions and maintain international competitiveness.