According to the industry on the 20th, the combined operating profit of South Korea's four refiners (SK Energy, GS Caltex, HD Hyundai Oilbank, and S-Oil) in the first half of this year came to about 11.08 trillion won. Compared with an operating loss of 1.3 trillion won during the same period last year, this marks a clear improvement in earnings. By company, HD Hyundai Oilbank (2.7576 trillion won), GS Caltex (4.1874 trillion won), S-Oil (2.1961 trillion won), and SK Energy (1.9344 trillion won) all posted profits of around 2 trillion won.
However, a significant portion of this earnings improvement was driven by inventory-related gains from a temporary surge in oil prices. In SK Energy's case, first-half inventory-related gains stood at about 1.34 trillion won, accounting for 69% of operating profit. S-Oil recorded inventory-related gains of 760 billion won during the same period, about 35% of total operating profit. HD Hyundai Oilbank also posted 500 billion won in oil-price and inventory-related gains in the second quarter alone, while GS Caltex's strong second-quarter results were driven by a surge in inventory gains.
Refiners face a time lag between purchasing crude, feeding it into refining processes, and selling it as petroleum products, resulting in wide swings in inventory profit and loss. Particularly during periods of rising oil prices, product prices climb while relatively cheap crude is reflected in costs, causing inventory gains to surge. The industry estimates that, considering factors such as facility scale, the four refiners' inventory-related gains in the first half of this year reached 3 trillion to 4 trillion won.
But international oil prices have swung again in the second half. The price of Dubai crude, which had held at $50–$60 per barrel in January, spiked to $137.82 in March in the aftermath of the U.S.–Iran war that broke out in February, then fell to around $60 in June when news of a memorandum ending the conflict was reported. War risks have recently resurfaced, sending prices fluctuating between $70 and $80, but that is still about 30% lower than the average price in March.
Based on major refiners' first-half inventory gains, a simple calculation suggests that each company would incur about 200 billion won in inventory losses for every $10 drop in oil prices per barrel. An industry official said, "As external uncertainties amplify, oil prices and other factors are swinging again," adding, "It is also difficult to forecast second-half results, so concerns are growing."
In response, refiners are stepping up efforts to strengthen new-business capabilities that could become future growth engines, drawing on the liquidity earned from the wartime boom to defend against earnings volatility. SK Energy is working to reduce its dependence on existing fossil fuels by expanding production of eco-friendly fuels. It recently built dedicated sustainable aviation fuel (SAF) production facilities and co-processing facilities within its Ulsan CLX, securing an annual production capacity of 100,000 tons. HD Hyundai Oilbank has also moved to capture the biofuel market through preemptive investment. Through a consortium, HD Hyundai Oilbank recently acquired Daekyung O&T, South Korea's largest producer of biodiesel feedstock, and is accelerating the vertical integration of eco-friendly fuels spanning from feedstock procurement to product manufacturing.
Competition to secure growth drivers linked to cutting-edge industries such as artificial intelligence (AI) infrastructure is also intense. GS Caltex has developed and completed demonstration of immersion cooling fluids for AI data centers, moving to capture the AI thermal-management market. S-Oil has also launched a demonstration of immersion cooling technology for AI data centers, entering the cooling solutions market. In addition, refiners are focusing on commercializing lubricants for electric vehicles in response to rising EV sales.
