Hormuz shock calls for a reset of Korea's energy strategy

More than two months into the Iran war, the closure of the Strait of Hormuz has pushed oil prices sharply higher and plunged the global economy into turmoil. Korea, heavily dependent on Middle Eastern crude, has been hit particularly hard. The OECD quickly cut Korea's growth forecast from 2.1 percent to 1.7 percent, marking one of the steepest downgrades among major economies. JPMorgan also identified Korea as one of the countries most vulnerable to oil price volatility.

The disruption extends beyond crude oil. Imports of naphtha, often described as the "rice of industry," have been blocked, forcing petrochemical plants to halt or scale back production. Shortages have even spread to everyday items such as garbage bags and medical syringes. The International Energy Agency has warned that energy supply conditions are unlikely to return to prewar levels even after the conflict ends. Korea's energy security now faces a new level of uncertainty. If a return to the previous system is no longer possible, a fundamental redesign of energy strategy is required.

The core principle of energy security is diversification. The more concentrated supply becomes in specific regions or routes, the greater the risk. Korea has made some progress. The share of Middle Eastern crude, which exceeded 90 percent in the mid-2000s, has declined to about 69 percent and more recently to around 56 percent as imports from the Americas and Africa increased. Yet this remains insufficient. A "post-Hormuz" strategy is essential.

Overland pipelines are emerging as alternatives. The International Energy Agency (IEA) has proposed a pipeline linking Turkey and Iraq, while a long-distance route connecting Iraq, Kuwait, Saudi Arabia and Oman has also been discussed. Korea should consider participating in such projects from the early stages to secure stable supply. Expanding joint stockpiling programs, in which oil from producing countries is stored in domestic facilities, could also provide priority purchase rights in times of crisis.

Overseas resource development is another area requiring national focus. Securing resources abroad can effectively substitute for domestic reserves. Yet Korea's self-sufficiency rate in oil and gas stood at only 10.8 percent in 2024, down from 15.5 percent in 2015. Japan's rate, by contrast, reached 42.1 percent and aims to exceed 60 percent by 2040.

The gap reflects differences in policy consistency and expertise. Japan has steadily supported its resource development institutions regardless of political changes. The Japan Organization for Metals and Energy Security employs a large number of specialists, including geologists, engineers and investment professionals, many of whom build decades of experience in their fields. In Korea, resource development policies have fluctuated with political cycles, at times being promoted and at other times abandoned. This inconsistency has weakened institutional capacity.

The next test for energy security reform lies in the 12th Master Plan for Electricity Supply and Demand, now under discussion. According to the Ministry of Climate, Energy and Environment, electricity consumption in 2040 could increase by up to 70 terawatt-hours compared with the previous plan, equivalent to 1.4 times Seoul's annual consumption or the output of three to seven new nuclear reactors. The surge is driven by expanding artificial intelligence data centers and semiconductor clusters.

The key question is how to meet this demand. The government's current approach remains heavily focused on renewable energy. Its recent energy transition plan aims to raise the share of renewables to over 20 percent by 2030. However, it does not address the need for additional nuclear power.