Thousands of miles from Iran’s bombardment, emerging Asia’s economies are absorbing blows of another kind, as fuel shortages threaten to strangle a region that is a major engine of global growth.
Asian countries rely heavily on oil flowing from the Middle East through the Strait of Hormuz, a key bottleneck through which around 20 million barrels of oil flowed a day before it was effectively closed by the conflict with Iran.
More than 80% of the crude oil and liquefied natural gas that passed through the strait was destined for Asia in 2024. Nearly 70% of that oil went to India, Japan, China and South Korea, according to the U.S. Energy Information Administration.
Why do we write this?
The vast majority of oil passing through the Strait of Hormuz was destined for Asia. Countries are now forced to make do with what they have, highlighting the cost of dependence on fossil fuels.
With supplies abruptly cut, residents and businesses across the region are feeling the consequences – from restaurant owners in India to jeepney drivers in the Philippines – as governments scramble to mitigate the damage. Analysts say net oil-importing countries such as India, Bangladesh, Myanmar, Thailand and the Philippines are being particularly hard hit.
“The GDP of Asian economies will definitely be affected,” says June Goh, senior oil market analyst at Sparta Commodities in Singapore.
“We will see quite a bit of pain in our region for at least a few months,” he adds. “Prepare to tighten your belt.”
Bend
From Singapore and Indonesia to Taiwan, Asian refining and petrochemical companies are invoking what is known as a force majeure clause to break contractual obligations in the face of oil shortages. If the flow of crude oil does not resume, the entire supply chain could collapse, Goh says. And even if supply is restored, it could take months for the industry to recover.
“In the meantime, everyone has to hunker down and overcome the conflict,” he says.
Among Asia’s net importers, some countries are better positioned than others to cushion the oil crisis.
Japan depends on crude oil imported from Gulf countries for more than 90% of its needs, but it has huge private and government oil reserves that could last about eight months. Japanese Prime Minister Takaichi Sanae announced that some of those oil reserves, equivalent to about 45 days, will begin to flow on Monday.
Japan established its reserve system after the 1973 oil crisis and has drawn on it several times, but this release is expected to be the largest in its history, at about 80 million barrels, according to Nikkei Asia.
China is the world’s largest crude oil importer and has bought about 90% of Iran’s oil exports. But it meets most of its energy needs (about 50%) with coal and depends on oil for only 17%. In recent years, the rapid expansion of China’s renewable energy resources, such as solar, wind and hydropower, have further decreased its vulnerability, experts say.
China’s “new energy industries are a good hedge against an oil crisis,” says Larry Hu, chief China economist at Macquarie Group in Hong Kong.
China also has a large strategic oil reserve that is estimated to last about four months, and aims to increase it during its new five-year economic plan.
But other Asian economies are much more vulnerable.
A fight for cooking gas
In India, a sudden shortage of cooking gas is forcing restaurants and hotels to close, exposing the country’s heavy dependence on imports and raising anxiety about broader disruptions.
Panic buying has spread to several cities and long lines have formed in front of natural gas distributors. Some restaurants have even gone so far as to reduce menu items that require longer cooking times.
About 60% of India’s liquefied petroleum gas (LPG) is imported, and about 90% of those shipments pass through the Strait of Hormuz.
As supplies tightened, India’s Petroleum Ministry ordered refiners on March 8 to maximize LPG production for domestic consumption, increasing domestic production by about 25%. Limited commercial supplies are being prioritized for essential sectors such as healthcare and education, leaving many businesses struggling.
“I have been contacting gas suppliers in the area for the last three days,” says Chanda Murthy, who had to close her restaurant in the southern city of Bengaluru after using up her last gas cylinder. “There is nothing available.”
Murthy worries that if he can’t get the fuel he needs to reopen, he will struggle to pay rent and salaries for his eight staff members.
“I’m baffled that the government was so ill-prepared,” he says. “This is a crisis situation and I don’t know how we will sustain it if it continues.”
Similar crises are unfolding across India, industry groups say. In Mumbai, around 20% of hotels and restaurants have closed or reduced operations.
“Restaurants simply cannot function,” says Manpreet Singh of the National Restaurant Association of India, which represents about half a million restaurants across the country.
Philippines feels the pressure
Asian governments are taking a variety of measures to mitigate the oil shock, some of them extreme. South Korea has introduced an oil price cap for domestic fuels for the first time in 30 years. Fuel rationing is underway in Bangladesh and Myanmar.
To reduce energy use, Vietnam and Thailand have imposed work-from-home policies, and Bangkok even urged bureaucrats to skip the elevator and take the stairs. Pakistan has closed schools and required universities to go online. And the Philippines will implement a four-day work week for government employees.
There, President Ferdinand Marcos Jr. requested congressional authorization to temporarily reduce excise taxes on petroleum products if global oil prices continue to rise.
“When the price of oil has exceeded $80 per barrel on average for a month, then emergency powers can be exercised,” Marcos told reporters on Tuesday.
The Philippines imports about 95% of its oil needs, leaving the country highly exposed to global supply disruptions and price swings. Marcos says the country has enough fuel for now, but transit operators are starting to feel the pressure.
“The (fares) remain the same, but of course our income is less because diesel is expensive,” says Uriel Bataclan, who drives a jeepney – a kitschy type of minibus used for public transport in the Philippines – in Cavite province, south of Manila. To cushion the impact on transport workers, the government has announced a fuel subsidy of 5,000 Philippine pesos (about $84) for public utility vehicle drivers, but Bataclan is not sure when that support will arrive.
The Iran war has also threatened Middle East fertilizer exports, raising concerns about a possible drop in productivity, says Arnel de Mesa, undersecretary of the Philippine Department of Agriculture. His agency is exploring organic fertilizers, biofertilizers and possible subsidies for farmers.
Bishop Gerardo Alminaza, president of Caritas Philippines, an influential social action group in the predominantly Catholic nation, says the crisis is exposing deeper structural risks linked to dependence on fossil fuels, warning that the country remains “dangerously dependent on imported coal, oil and gas.”
He hopes this will be a wake-up call for policymakers to view renewable energy as “a national survival strategy.”
