※ The attached PDF is provided in Korean.

In this issue brief, we assess South Korea’s vulnerability to geopolitical energy shocks in light of the February 2026 Middle East crisis, which caused oil prices to surge by 85 per cent within ten days. As a country relying on Middle Eastern imports for 70 per cent of its crude oil, South Korea faces a severe macroeconomic triple squeeze of slowed growth, high inflation, and a weakened currency. Whilst scaling up renewable energy is the ultimate solution, our analysis indicates that simply adding solar panels is insufficient because heating and transport networks remain deeply locked into fossil fuels, with gas and oil accounting for over 40 per cent of building energy use and petroleum driving 66 per cent of transport energy. A comparison with China’s relative resilience reveals how proactive electric vehicle adoption and clean electricity grids can shield a nation from external energy shocks. Consequently, we treat this crisis as a structural turning point to phase out fossil fuels rather than a temporary disruption to be managed with short-term price caps.

To identify viable domestic pathways, we analyse international policy responses in the building and transport sectors during past crises. During the 2022 European gas crisis, countries prioritised energy conservation through mandatory temperature limits, reducing overall gas consumption by 17 per cent over three years, while providing targeted subsidies to vulnerable households. In the long term, the European Union legislated a 2040 phase-out target for fossil-fuel boilers and accelerated heat pump deployment, resulting in 2.8 million installations in 2022 alone. In the transport sector, Germany’s temporary nine-euro ticket sold 52 million passes, boosting public transit ridership by 25 per cent and saving 1.8 million tonnes of carbon dioxide, which paved the way for the permanent 49-euro Deutschlandticket. Furthermore, countries like Spain, Australia, and Pakistan implemented targeted free public transit programmes, while the Philippines and Pakistan introduced four-day working weeks to reduce commuter fuel demand.

The proposed approach calls for South Korea to move beyond temporary fuel tax cuts and embark on deep decarbonisation of its urban systems. For the building sector, the key recommendations include establishing post-construction performance monitoring for net-zero buildings, reforming gas tariffs to reflect actual procurement costs and carbon pricing, expanding funding for green retrofits, and providing integrated solar-heat pump-storage packages. For the transport sector, the focus must shift towards public transit expansion in regional areas alongside fare reductions, implementing licence-plate-based driving bans in urban centres, raising congestion charges, and formalising bicycle transit networks. To anchor these systemic changes, the proposals recommend a legally binding ban on the sale of new internal combustion engine vehicles by 2035 and an immediate reduction in highway speed limits to curb petroleum consumption.

Author

Byoung Kweon KIM | Director | bkkim21kr@igt.or.kr
Junghwa HWANG | Local Transformation Team | hjhlucia@igt.or.kr