Industries are guaging the prospects of their US businesses under US President-elect Joe Biden, and South Korean refineries and petrochemical companies are among them.

The sticking points are whether Biden’s anti-fracking policy and renewable energy push will actually impact the global price of oil and their businesses.

“Biden’s limit on fracking will curb the production and supply of shale oil and gas. But regardless of Biden’s anti-fracking policy, demand on oil will weaken fundamentally as the US aims to transition to renewable energy, which is a negative factor for the refining industry,” said DB Financial Investment analyst Han Seung-jae.

The analyst added that the global oil price won’t be affected by the anti-fracking policy and remain cheap as the demand for oil in the US won’t be as great as before after the transition.

“For petrochemical companies, if the global price of oil maintains its current level, it would be a positive factor as they will still be able to cut costs in raw materials for making their chemical products,” the analyst said.

In contrast to some opinions that the oil price will stay unchanged, Hyundai Oilbank, one of the four leading South Korean refineries, predicted that the price of oil will go up.

“Due to the anti-fracking policy, the US will have to import oil from somewhere to make up for the immediate supply reduction, which will drive up the global oil price. Though Hyundai Oilbank sources oil from the Middle East and South America, it will be affected by the chain reaction of global oil price,” a company official said.

“In the short term, the rise of oil price will be good for refineries. However, in the long term, expensive oil price can discourage demand and play out badly for refiners.”

In Korea, the domestic oil price fluctuates with the global oil price. If the global oil price goes up, refineries can sell oil they had stocked up at cheap price about one month ago at higher price to customers.

Regardless of Biden’s impact on oil price, some petrochemical industry officials welcomed Biden as his relatively less hostile stance towards China compared to Trump can alleviate trade tensions with China.

“China is one of the greatest consumers of oil. Considering Biden is less aggressive in terms of the trade war against China, the change of administration would help China restart its factories and recover its demand for oil and petrochemical products. China’s recovery will eventually lead to the recovery of the global economy,” a petrochemical industry official said. 

By Kim Byung-wook (kbw@heraldcorp.com)