Low South Korea tariffs on U.S. crude oil imports help U.S. oil to flourish in Korean market

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South Korea tariffs on U.S. crude oil imports are close to zero, thanks to the South Korea-US free trade agreement. South Korea major refineries have benefited significantly, with lower import costs. South Korea imports of U.S. crude oil increased significantly in 2024, and the market prospects are broad.

Officials from the South Korea Ministry of Trade recently stated that although the South Korea MFN applicable tax rate is 13.4 percent, thanks to the South Korea-US Free Trade Agreement, the South Korea tariff rate on US goods is close to zero. This policy move sends a positive signal to the international physical oil market, especially after US President Trump expressed concern about the South Korea tariff rate. As the third largest crude oil importer in Asia, South Korea's WTI Midland crude oil import prospects are still broad.

Analysis of Tariff Policy

trump had challenged the South Korea tariff rates at a joint session of Congress, but South Korea Ministry of Trade, Industry and Economy (MOTIE) officials noted that tariffs on most goods between the two countries had been removed under the Korea-US free trade agreement that took effect in 2012. As of 2024, South Korea's effective tariff rate on U.S. imports is only 0.79 percent. Although the MFN rate is high, it only applies to imports from WTO member countries that do not have preferential trade agreements with South Korea.

South Korea refineries have benefited significantly.

Over the past decade, major South Korea refiners and petrochemical manufacturers such as SK Innovation, Hanwha Total, GS Caltex and Hyundai Petroleum Bank have capitalized on the low level of U.S. crude import tariffs. These companies have found that lighter, sweeter U.S. crude is in some cases cheaper than Saudi and Abu Dhabi crude, thanks mainly to the Korea-US free trade agreement and the government's freight rebate program.

Import Cost and Market Performance

south Korea refiners paid an average of $78.86 a barrel for U.S. crude shipments in January, down from $79.85 a barrel for Saudi crude, according to the state-run South Korea National Oil Company. In addition, the free trade agreement has reduced WTI Midland crude oil procurement costs by up to $2 billion. In 2024, South Korea imported 0.16843 billion barrels of US crude oil, up 18.3 per cent year-on-year, making it the largest annual US crude oil buyer in Asia.

Price dynamics and outlook

in terms of price, on March 5, Platts Energy Information assessed WTI Midland crude oil at a premium of US $4.45 over Dubai in recent months on the basis of DES Lishui. S. light sweet crude premium averaged $5.23/bbl in the first quarter of 2025, up from $4.40/bbl in the fourth quarter of 2024. These data indicate that South Korea demand for US crude oil continues to be strong and the market outlook is positive.

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