Note: Global Morning Briefing summarizes international news reported by The Seoul Economic Daily.
U.S., Japan and Europe Cut Refineries; China Builds an Energy Breakwater
Two wars — one pitting the United States and Israel against Iran, the other between Russia and Ukraine — have triggered a squeeze in petroleum product supplies, pushing national refining capacity to the center of global energy policy. Unlike advanced economies that have shut refineries amid a shift away from oil, China has expanded its plants and is now acting as a breakwater in the current crunch.
According to Britain's Energy Institute on the 5th, global refining capacity grew an average of 0.6% a year between 2015 and 2025, falling short of the 1% rise in consumption. Last year, consumption rose 1.3% while refining capacity fell 0.3%. Capacity in member countries of the Organisation for Economic Co-operation and Development declined an average of 0.2% a year, with steeper drops in the European Union at minus 0.7%, Australia at minus 6.9% and Japan at minus 1.8%.
After the war with Iran broke out in February, diesel and jet fuel prices surged, and Europe's jet fuel inventories fell below 30 days of supply in June. As Russia restricted exports through October, the bottleneck shifted to diesel, and U.S. diesel inventories in September fell to their lowest level since 1982.
After U.S. President Donald Trump raised the possibility of banning diesel exports, the Group of Seven — the United States, Britain, France, Germany, Italy, Canada and Japan — along with the European Union agreed on the 2nd to jointly release 100 million barrels of diesel and crude oil. Energy Secretary Chris Wright said in a CBS interview on the 4th that he expected U.S. diesel prices to fall below $6 a gallon.
China's refining capacity, by contrast, grew an average of 2.3% a year over the same period. Beijing curbed exports in March, just after the closure of the Strait of Hormuz, then gradually eased the restrictions while expanding its market clout. It reimposed an export ban this month, leaving Australia, Vietnam, Japan and Indonesia worried about supply disruptions.
The International Energy Agency projected that global energy investment would reach a record $3.4 trillion (about 4,573 trillion won) this year, with fossil fuels accounting for 35%, or $1.2 trillion (about 1,614 trillion won). Daniel Evans, head of S&P Global Energy, noted that without sufficient refining capacity it becomes difficult to protect consumers, ensure energy security and maintain trade flows.
Alaska LNG, a Candidate for Korean Investment, Faces Doubts at Home
The Alaska liquefied natural gas project, floated as a candidate for South Korean investment in the United States, remains the subject of debate over its commercial viability within the U.S. itself. Against criticism that its cost is more than double that of existing projects, the developer points to a shipping-cost advantage in reaching Asian markets.
According to Reuters and other outlets on the 4th, lead developer Glenfarne Group estimates the total project cost at $44.5 billion to $54.5 billion (about 60 trillion to 73 trillion won). That works out to roughly $2.2 billion to $2.7 billion (about 3 trillion to 3.63 trillion won) per million tons of annual capacity — more than double the figure for most U.S. LNG projects, which have been built for less than $1 billion. The higher cost stems from the need to lay a new pipeline of about 1,287 kilometers from the North Slope in the north to Nikiski in the south. That stretch alone is expected to cost $13.2 billion to $16.9 billion (about 17.75 trillion to 22.72 trillion won).
Skepticism centers on profitability. Jason Feer of energy consultancy Poten & Partners said he had seen no evidence that Asian buyers were willing to pay a premium for supply security. Glenfarne counters that the distance to South Korea, Japan and Taiwan is far shorter than from the U.S. Gulf Coast, making shipping to Asia at least 65% cheaper.
Views also diverge on securing demand. Glenfarne said it had identified potential customers for 13 million tons a year, about 81% of the 16 million tons a year needed for project financing. Much of that, however, is non-binding. Bloomberg also reported that 345 million tons of new LNG capacity is expected to come online worldwide by 2030, equivalent to about 80% of current global demand.
Bolsonaro Leads First Round of Brazil's Presidential Vote as Right Gains in South America
Conservative Senator Flávio Bolsonaro finished first in the opening round of Brazil's presidential election, an unexpected result that put him ahead of President Luiz Inácio Lula da Silva. A Bolsonaro win in the runoff on the 25th would further extend the string of right-wing victories across Latin America, a trend dubbed the "blue tide."
According to major foreign news outlets on the 4th, with 99.99% of ballots counted, Bolsonaro took 47.03% of the vote against 45.16% for Lula.
Polls taken just before the vote had shown Lula ahead by 1 to 3 percentage points, but the outcome differed. Foreign media attributed the result to high living costs, borrowing rates and public insecurity stemming from the expansion of criminal organizations, all of which worked against Lula. Bolsonaro courted voters with pledges to designate drug gangs as terrorist organizations and to build five maximum-security prisons modeled on those in El Salvador.
A Bolsonaro victory in the runoff would leave eight of South America's 12 countries under conservative leadership. Beginning with Argentine President Javier Milei in 2023, conservative candidates have won successive elections in Bolivia, Chile, Colombia and Peru. Reuters assessed that hard-right forces had gained strength as economic weakness and insecurity became voters' top concerns.
Brazil's foreign policy is also likely to shift from closer ties with China toward the United States. Trump has opposed the imprisonment of the candidate's father, former President Jair Bolsonaro, who is jailed on corruption charges, and has imposed steep tariffs on Brazil. Bloomberg noted that Brazil had been the last country holding out against Trump's "Monroe Doctrine."
Financial markets see the result as positive. Under Lula, the nominal fiscal deficit rose to about 10% of gross domestic product and public debt to 80%, while Bolsonaro has pledged sweeping spending cuts.
U.S. Pulls All Bombers From U.K. Base After Signs of Terror Plot
The U.S. military has moved all of its strategic bombers from a British air base used in strikes on Iran back to the American mainland. The relocation followed the discovery of signs of a terror plot near the base, with Washington and London suspecting possible Iranian involvement.
The Associated Press reported on the 4th, citing a U.S. Defense Department source, that U.S. Air Force bombers stationed at RAF Fairford in Gloucestershire, England, were all redeployed to the mainland over the past weekend because of new threat concerns. The base has served as a hub for dozens of long-range bombers, including B-52s and B-1s, since the war with Iran began in February.
British police arrested five British men near the base on the 27th of last month on explosives and terrorism-related charges. No explosives were found in their three vans, but the vehicles were carrying flammable materials including gasoline. Police detained an additional suspect, a dual British-Iranian national, on the 1st of this month on charges of plotting an attack.
British Prime Minister Andy Burnham said there were strong indications that Iran had played a role in the plot and that the government shared that assessment. The United States and Israel also suspect links to Iran's Islamic Revolutionary Guard Corps or a separate military command. Trump referred to possible ties between the suspects and Iran, and Secretary of State Marco Rubio asserted that the hand of a foreign actor was clearly involved. Iran, through its embassy in London, flatly denied the allegations as baseless and malicious speculation.
Adrian Shtuni, a U.S. counterterrorism expert, told The New York Times that the IRGC can use criminals or juveniles as disposable operatives at any time, and that its multilayered network of intermediaries means that even failed plots do not expose who is behind them, making it unlikely that such incidents escalate into diplomatic disputes or war.
Russian Anti-Plague Institute Worker Dies of Unknown Cause; Western Media Raise Plague Possibility
A worker at an infectious disease institute in Russia's Irkutsk region has died of pneumonia of unknown origin, prompting Western media to raise the possibility of pneumonic plague. The Russian government has yet to release findings from a definitive investigation.
Russia's Tass news agency reported on the 4th, citing Rospotrebnadzor, the consumer rights protection and welfare oversight agency that handles infectious disease control, that a worker at the anti-plague institute in the Irkutsk region had been diagnosed with pneumonia of unknown origin. Axios and CNN also reported that the worker had died after the diagnosis.
The victim was a 28-year-old woman who is believed to have broken a test tube containing pneumonic plague bacteria at the institute on the 25th of last month. She was hospitalized on the 29th with severe pneumonia symptoms, and her condition deteriorated until she died overnight between the 1st and the 2nd of this month.
Russian health authorities placed 200 people who had been in contact with her under observation and isolated them at local medical facilities. No signs of the pneumonia spreading have been reported so far.
The U.S. government is monitoring the situation. A State Department official told CNN that Washington was aware of the reported possibility of a death from pneumonic plague in Russia and was closely watching developments together with the Centers for Disease Control and Prevention and other agencies. The World Health Organization said plague has a high fatality rate but is easily treated with antibiotics, and that transmission can be prevented with infection-control measures.
An aluminum plant near the institute issued mask-wearing guidance to all employees as a precaution and urged them not to panic. Even so, CNN reported, the fallout appears to be widening.
