Korea weighs quadrupling its crude freight subsidy as Dubai crude jumps 53% in five weeks

The subsidy pays the difference in freight cost ^[3]. Dubai crude went from $80.80 a barrel on Aug. 7 to $123.70 on Sept. 11, a move of $42.90, or 53.1%, over 35 days ^[10][1]. The freight rate was covered in full before the state cut its share to 25%, so restoring it quadruples what the government pays on each claim ^[4][5]. The report gives no figure for what a higher rate would cost, or for the freight gap per barrel ^[20].

Korea bought $16.046 billion of Saudi crude in the first seven months of the year, 31.3% of the total ^[14]. That implies a whole crude bill near $51.3 billion for the period, about $7.3 billion a month ^[2]. At flat volumes, a 53.1% marker move on a $7.3 billion month is roughly $3.9 billion ^[3]. Term cargoes price off lagged monthly formulas, so the increase arrives over weeks.

The same ministry sets the other end of the refiners' margin. The oil price cap has run since March 13, with ceilings of 1,784 won a liter for gasoline, 1,773 won for diesel and 1,380 won for kerosene, and the ninth round expires on the 18th ^[16][17]. The industry expects an extension, and higher ceilings on individual products are under discussion ^[16]. On the 11th, Singapore gasoline was quoted at $147.90 against Dubai at $123.70, a gross spread of $24.20 a barrel ^[11][4]. Naphtha rose 15.2% over the month while gasoline rose 26.8% ^[11].

What the higher rate buys is delivery dates in November and December. A government official said imports for September and October have already been secured at more than 90% of year-earlier volumes ^[6], and an industry official said tankers already bound for South Korea should arrive without trouble, while warning that supply conditions a month out would be difficult if the logistics bottleneck drags on ^[15]. A tanker leaving Yanbu and routing through the Suez Canal instead of Bab el-Mandeb needs about 30 more days at sea ^[12]. Repairing the East-West pipeline is expected to take considerable time, so Saudi barrels may be hard to source even on the detour ^[13]. The ministry will also build an "oil supply and demand stabilization diagnostic index" combining the factors that affect crude supply ^[5].

Dubai at $123.70 sits at least $23.70 above the $100 level cited for Brent and WTI ^[10][7]. That premium prices the routing risk into the grade Korea imports most.

Two other paths are live. Saudi Arabia had been moving about 5 million barrels a day through the East-West line and Yanbu, 4% to 5% of global supply, and the government said it would monitor the restart of that pipeline ^[9][19]. If the line comes back and Bab el-Mandeb clears, the marker falls and the freight subsidy goes unused. If neither happens, the cap that was introduced on the assumption it would run about six months, and is now in its ninth round, becomes the larger fiscal item ^[16]. I would weight the second higher, because the repair timeline is open-ended ^[13]. If Dubai trades back into the $80s before the tenth round of the cap comes due, that weighting was wrong.