South Korea's Energy Crisis: Canada Steps In with Oil Supply

The ongoing conflict in the Middle East has led to significant disruptions in global oil supply, particularly affecting South Korea, which relies on the region for nearly 70% of its oil imports. Following the blockade of the Strait of Hormuz by the U.S. military, President Donald Trump warned that Iranian ships approaching the blockade would be “immediately eliminated.” This situation has forced several countries, including Sri Lanka, Myanmar, and Italy, to ration fuel and impose purchase limits to manage dwindling supplies. Wood Mackenzie, a commodities consultancy, predicts that South Korea could see a staggering 74% increase in electricity costs if the conflict persists.

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The completion of the Trans Mountain Expansion Project (TMX) in May 2024 marked a pivotal moment for Canadian oil exports. This pipeline, which increased capacity from 300,000 to 890,000 barrels per day, enabled Canadian crude to reach the Pacific coast at a commercial scale for the first time. Despite skepticism regarding its high costs and potential lower demand for oil, TMX became crucial as geopolitical tensions escalated. The U.S. imposition of a 10% tariff on Canadian energy imports in early 2025 further underscored the need for Canada to diversify its oil markets away from the United States.

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As the Strait of Hormuz was effectively closed, South Korean refiners activated emergency plans to secure alternative oil supplies. The TMX pipeline and the oil stored at Westridge Terminal emerged as viable options due to their price competitiveness and immediate availability. From May 2024 to September 2025, Canadian oil exports to South Korea surged to CAD$411 million, a remarkable increase from zero just 17 months prior. Major South Korean companies, including GS Caltex and HD Hyundai Oil Bank, began importing Canadian crude, with plans to increase volumes in the future.

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The landed cost of Canadian crude in South Korea was reported at $64.65 per barrel in 2025, significantly cheaper than American and Saudi crude, which were priced at $73.64 and $73.80, respectively. This pricing advantage, coupled with the South Korean government's authorization for refiners to exchange non-Middle Eastern crude for government-held reserves, incentivizes the shift towards Canadian oil. The government is actively subsidizing this diversification strategy, positioning Canada as a primary beneficiary of South Korea's changing energy landscape.

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The evolving dynamics of oil supply amid geopolitical tensions have opened new avenues for Canadian crude in Asian markets. With South Korea's imports from Canada projected to grow significantly in the coming years, the TMX pipeline has become a critical asset in ensuring energy security for both nations. As the situation in the Middle East remains uncertain, Canada is poised to play a vital role in meeting South Korea's energy needs.

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