South Korea Has An Oil Problem. Canada Is Helping To Fix It

By Andrew Topf - Apr 15, 2026

• The Strait of Hormuz blockade and failed Iran talks are triggering global fuel shortages, forcing rationing in multiple countries and driving up energy costs.
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• Major importers like South Korea are scrambling to diversify supply, with Canadian crude emerging as a competitive alternative due to price and availability.
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• Canada’s Trans Mountain pipeline is enabling a major shift in global oil flows, boosting exports to Asia and reducing reliane on the U.S. market.

Negotiations for an end to the Iran war have so far failed, and the Strait of Hormuz remains effectively closed. 

On Monday, the US military started blockading ships entering and exiting Iranian ports. President Trump said Iranian ships would be “immediately eliminated” if they approach the blockade, which is meant to force Tehran back to negotiations.

At least five countries — Sri Lanka, Myanmar, Cambodia, Bangladesh, and Slovenia — are rationing fuel and implementing mandatory purchase limits to conserve supply.

Major oil-importing nations are seeking Middle East workarounds to preserve a steady supply of oil and natural gas.

Wood Mackenzie, a commodities consultancy, estimates the biggest loser from the Hormuz closure will be South Korea, the world’s fourth largest oil importer, while Italy will be the hardest hit in Europe.

If the war continues and fuel costs remain high all year, South Korea would face a 74% increase in the cost of a kilowatt-hour of electricity, while Italy would see an 80% jump, CBC News reports. Japan and the UK, respectively, could face a 41% and a 27% increase.

Until recently, the United States was the only destination for Canadian crude, buying an eye-popping 96%.

The reason Canada had one single customer for its oil was not out of choice but because most oil pipelines run north-south, to refineries in the US Midwest and the Gulf Coast.

Attempts to build pipelines east to west — Energy East, a proposed line to move Alberta crude to New Brunswick and Quebec, along with the Northern Gateway pipeline that would have run across northern Alberta and British Columbia to tidewater — both failed due to local opposition.

The Americans effectively held Canadian oil hostage. Alberta crude, which is heavy and contains impurities like sulfur, was sold at a discount to the US benchmark WTI, sometimes up to $20 a barrel less.

As a video explains, Billions of dollars evaporated every year, simply because Canada had no exit. That’s the problem Trans Mountain was built to solve.

Everything changed in 2024 with the completion of the Trans Mountain Expansion Project, a twinned pipeline that extended from Edmonton, Alberta, to the Westridge Marine Terminal in Burnaby, a suburb of Vancouver.

When it came online in May 2024, TMX pushed capacity from 300,000 to 890,000 barrels per day. For the first time, Canadian oil could reach the Pacific coast at genuine commercial scale.

Skeptics complained that the ballooning cost of the pipeline — nearly CAD$34 billion — and projected lower demand for oil due to electrification and renewables — would make TMX a white elephant.

That, high shipping fees and the fact that Vancouver’s port could only handle Aframax-class tankers, too small for the VLCC supertankers that Asian markets typically rely on, all seemed to spell doom for TMX.

Then came the re-election of President Donald Trump.

When the mercurial POTUS slapped a 10% tariff on Canadian energy imports in early 2025, it hurt Alberta oil exporters and sent a chill through the Canadian oil patch. Suddenly Canada’s guaranteed energy customer didn’t look so reliable.

Enter TMX, the pipeline many loved to hate, strengthened by a change of direction by the Canadian government in favor of resource development, and diversification of Canadian exports away from the United States.

When the US and Israel attacked Iran on Feb. 28, the Strait of Hormuz, through which 20% of the world’s daily oil supply passes through, was blocked within 72 hours.

South Korea, which gets nearly 70% of its oil supply from the Middle East, suddenly faced an energy crisis. Big Korean refiners like HD Hyundai Oil Bank and SK Energy activated emergency diversification plans. They needed oil, fast. The product needed to be price-competitive, available immediately, and most importantly, didn’t have to run any geopolitical gauntlets.

Canada’s TMX pipeline and the oil stored at Westridge Terminal was seen as a good option because it fit all three criteria. Moreover, Korea was already doing business with the terminal.

To explain, we need to go back to 2023, when Canada exported exactly $0 worth of oil to South Korea — despite sitting on the world’s fourth largest proven oil reserves.  

After the TMX pipeline was completed in May 2024, Asian buyers started making enquiries. South Korea was front of the line.

GS Caltex took the first test cargo back in September 2024, 300,000 barrels shared with Japan's ENEOS. HD Hyundai Oil Bank followed with 548,000 barrels in April 2025. SK Energy is currently in long-term contract negotiations.

Total Canadian oil exports to South Korea from May 2024 through September 2025 reached CAD$411 million — from zero to 411 million dollars in under 17 months.

In TMX's first year of operation, Canadian oil exports to markets outside the United States jumped nearly 60%, hitting a record of roughly 183,000 barrels per day. China overtook the US to become the pipeline's single largest customer.

Japan, India, Brunei, Taiwan are all taking deliveries.

Another video source reports that, in spring 2026, Korean refiners facing the worst Middle Eastern supply disruption in a generation began making phone calls that would have seemed absurd just three years ago. Not to Houston, not to Riyadh, to Calgary. A Korean government official overseeing the country's oil imports confirmed the shift in terms that leaves zero room for ambiguity.

Korean refiners are actively bringing in Canadian crude as an alternative supply amid the current inability to secure Middle Eastern barrels.

Back to the three criteria South Korea was looking for, amid the Middle East oil crisis, Canada’s cheap crude, known as Western Canadian Select, beat its competitors on price.

The landed cost of Canadian crude in Korea was $64.65 per barrel as of 2025. American crude, $73.64. Saudi crude, $73.80. Canadian oil is arriving in South Korea nearly $10 cheaper per barrel than the competition.

A spokesman for HD Hyundai Oil Bank confirmed the company plans to gradually increase Canadian volumes going forward. Two of Korea’s largest energy companies, SK Energy and GS Caltex, are also reportedly actively pushing to secure Canadian supply.

While the amount of oil South Korea is importing from Canada is currently small — only about half a percent of total imports — changing trading partners takes time and shipment volumes are incremental.

Consider: Canadian oil exports to Korea went from zero to 4.54 million barrels in just two years. Within the next several years, Canada could be supplying tens of millions of barrels annually. And then there’s this:

Seoul has authorized its refiners to exchange crude imported from non-Middle Eastern countries for government-held Middle Eastern reserves. 20 million barrels are slated for these swaps, with 2 million already released.

This mechanism essentially gives Korean refiners a financial incentive to buy Canadian. The government is actively subsidizing diversification away from the Middle East, and Canada is positioned to be a primary beneficiary.

By Andrew Topf for Oilprice.com