Gov’t calms fears about Saudi oil

Vice Finance Minister Kim Yong-beom, second from right, speaks at a meeting held at the headquarters of the Korea Federation of Banks on Tuesday. [YONHAP]

With growing concerns about Saudi Arabian oil, the Korean government said it could look into the possibility of releasing 200 million barrels stockpiled for emergencies by both the government and the private sector.

“The government will closely monitor crude prices at home and abroad, and if needed, we will quickly secure alternative imports while cooperating closely with refiners,” said Vice Minister Kim Yong-beom during a government meeting on Tuesday. “If the supply situation worsens, the government and private sector will release the oil that has been stored up strategically as well as inventories.”

According to the finance minister, the government alone has 96 million barrels in an emergency stockpile.

The vice finance minister stressed that the situation in the Middle East will have a limited impact on the Korean economy.

“Most of the crude supplied from Saudi Arabia is on long-term contract [with a maximum 20 years],” Kim said.

“The Saudi government also said there will be no problem in the supply [of crude] as it will use its own stored up crude.”

Saudi Arabia is Korea’s largest crude oil supplier, accounting for 29 percent of Korea’s total crude imports.

Concerns arose after the world’s largest oil production plant came under a drone attack in Saudi Arabia on Saturday that led to the shutting down of two crude refiners that produce 5 percent of the global supply.

The global oil market was rattled. West Texas Intermediate futures on the New York Mercantile Exchange on Monday rose 14.7 percent to $62.90, which according to Reuters was the sharpest spike in 11 years.

Brent futures at one point surged roughly 20 percent.

In a report, Goldman Sachs projected that Brent crude prices could quickly rally above $75 per barrel if the current level of outage lasts for more than six weeks.

Korean consumers could be affected, especially as the Korean government ended fuel tax relief at the end of last month. Last November, the government lowered the fuel tax to help lower-income households and businesses that heavily rely on fuel, like truck driving. Some 2.8 million owners of 1-ton or smaller trucks were estimated to benefit from the lowered tax.

That tax was lowered starting in November before it was restored on Aug. 31.

“As there is the possibility of uncertainties in the Middle East expanding and prolonging, we will need to be fully prepared,” Vice Minister Kim said.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]