The rapid rise in crude oil costs, driven by geopolitical tension and post-pandemic demand recovery, has increased the import cost burden of net oil-importing APAC countries. Taiwan and South Korea have the highest crude oil import reliance among the countries that Fitch Ratings covers, of close to 100%, followed by India, with above 80%, and China, with more than 70%. Crude oil prices have retreated from recent highs, but they are likely to stay elevated yoy for the remainder of 2022.

Regional refining margins, especially for gasoline, slid on a weaker global demand outlook, albeit remaining at high levels. APAC countries have differing pricing mechanisms for transport fuel. Most of the countries we analyse have some degree of government pricing control to maintain fuel price affordability among end-consumers, mainly gasoline and diesel users, except for Korea, which is fully deregulated. Rated state-owned oil companies have been partially absorbing the burden of higher crude oil costs. The cost absorption is embedded in retail pricing mechanisms, such as China’s and Taiwan’s, or from limited pass-through of retail price increases to end-consumers despite market-oriented price mechanisms, such as in India.
Source: Fitch Ratings