(News1)
Rising energy prices driven by tensions in the Middle East are expected to persist into the second half of the year, increasing cost burdens for South Korean energy companies even if the conflict subsides.
According to KB Securities, global oil supply is projected to decline by around 1 to 3 percent in the third quarter even if the conflict ends, extending supply instability. While this is lower than the estimated 6 to 7 percent drop in the second quarter, it still adds to market uncertainty.
A key factor is the time required to fully restore operations in the Strait of Hormuz, including redeploying oil tankers and rebuilding financial and credit flows. Additional delays are expected from reversing voluntary production cuts made due to storage constraints and repairing damaged energy infrastructure in Gulf countries.
Analyst Kang In-sun of KB Securities said that while long-term damage such as Qatar’s Ras Laffan LNG terminal, which could take three to five years to fully recover, is relatively rare, the combined impact across Gulf nations could reach about 3 million barrels per day, including 600,000 to 700,000 barrels per day from Saudi Arabia.
Higher energy prices are likely to strain the financial structure of state-run companies such as Korea Gas Corporation. Liquefied natural gas import prices are typically reflected with a lag of two to three months, meaning cost pressures from the February conflict are expected to intensify starting in May.
While procurement costs rise, the company cannot freely increase retail gas prices for residential and general consumers. Its unpaid receivables — the portion of supply costs not reflected in tariffs — have already exceeded 14 trillion won ($9.5 billion).
Although a pricing committee is scheduled to meet at the end of May to determine wholesale rates, industry officials say raising prices could be difficult ahead of the June local elections.
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