South Korea Raises Refund Cap for Diversified Crude Oil Imports Amid Middle East Tensions

The government of South Korea has decided to raise the ceiling on reimbursements for extra shipping costs linked to crude oil purchases from regions outside the Middle East. The Ministry of Planning and Budget announced that Vice Minister Jo Yong-beom had held a meeting and decided to relax the refund criteria for diversified crude oil import levies and widen the refund ceiling through December.

The petroleum import and sales levy is a statutory charge levied on importers of crude oil, petroleum products, and natural gas. The money collected goes to the Special Account for Energy and Resources Projects and is used for oil supply and price stabilization.

To curb excessive reliance on crude oil imports from the Middle East, the government runs a diversified crude oil import levy refund program. When crude oil is brought in from regions other than the Middle East, such as the Americas, Europe, and Africa, part of the additional freight difference compared with Middle Eastern crude is refunded from the import levy.

The refund cap will increase from the current roughly 25% to up to 100%. The existing April-June refund criteria, including a minimum intake volume of 4 million barrels and a long-term contract requirement of one year, will be waived. This decision aims to ease crude oil supply disruptions caused by the Middle East war.