# Dynamic Changes in the Export Competitiveness of the South Korean Oil Refining Industry
## 4 Results
### Dynamic Change of Export Competitiveness by Matrix Analysis  
The competitiveness of each petroleum product can be comprehensively judged using a 2 \(\times\) 2 matrix of the TSI and the RCA index. As shown in Figure 5, items that are export-specialized and have a comparative advantage are classified as being in the 'high competitiveness group'. Import-specialized and comparative disadvantage items can be classified as the 'low competitiveness group'. The third group consists of items that have a comparative advantage but fall under the import specialization definition, and this group can be classified as the 'import-specialized group with comparative advantage'. For these items, South Korea has sufficient export competitiveness but has to rely on imports to meet domestic demand. Finally, items that are comparatively inferior and fall under the export specialization definition have a weak competitive advantage compared to other items but depend on exports because of a narrow domestic market. This group can be classified as the 'export-specialized group with comparative disadvantage'. The result of dynamic changes of portfolio classification of TSI and RCA are presented in Figure 6. As of 2005, diesel, automobile gasoline, jet oil, lubricating oil, and bunker C oil fell within the 'high competitiveness group'. However, while bunker C oil, which belonged to the 'high competitiveness group' in 2005, moved to the 'export-specialized group with comparative disadvantage' in 2010, bunker A oil, which belonged to the 'low competitiveness group' in 2005, switched to the 'export- specialized group with comparative disadvantage' in 2010. Aviation gasoline, which belonged to the 'low competitiveness group' in 2010, moved to the 'export-specialized group with comparative disadvantage' in 2015, while bunker A oil and bunker C oil, which belonged to the 'export-specialized group with comparative disadvantage' in 2010, switched to the 'low competitiveness group' in 2015. Figure 5: Portfolio classification of trade specialization index and revealed comparative advantage index. Bunker A oil and bunker C oil, which belonged to the 'low competitiveness group' in 2015, moved to the 'export-specialized group with comparative disadvantage' in 2019. As South Korea is the only OECD country to impose an individual consumption tax and education tax when heavy oil is used as an intermediate product, export competitiveness may be weaker compared to other countries [19]. Naphtha belonged to the 'import-specialized group with comparative advantage' throughout the entire period. South Korea has a comparative advantage in naphtha production. However, due to its high production of petrochemical products, the demand for naphtha is also high, and, as a result, domestic production is not meeting domestic demand [20]. On the other hand, diesel, automobile gasoline, jet oil, and lubricating oil belonged to the 'high competitiveness group', since they were export-specialized items with a comparative advantage over the entire period. The source of the high competitiveness of these industries can be found in economies of scale and the high percentage of advanced facilities [21]. All four major South Korean oil refineries (SK Energy(Seoul, South Korea), GS Caltex (Seoul, South Korea), Hyundai Oil Bank (Seoul, South Korea), and S-Oil (Seoul, South Korea)) have outstanding economies of scale so that the refining capacity of every single plant lies in the top ten in the world. In addition, the ratio of advanced facilities that extract high value-added light oil (such as expensive automobile gasoline and diesel) from cheap bunker C oil reaches as high as 40%. Thus, South Korea has high quality competitiveness. Advanced facilities that can create economies of scale and high added value enhance cost competitiveness, and world-class eco-friendly performance contributes to quality competitiveness; together these have become the driving force for the export strategy of industrializing the South Korean petroleum industry.