Southeast Asia closes offices, limits travel as oil crisis intensifies | US-Israel war over Iran news

Taipei, Taiwan – Governments and businesses across Southeast Asia are scrambling to stave off energy shortages as the Strait of Hormuz remains closed to maritime traffic amid the fallout from the United States-Israeli war on Iran.

Thousands of kilometers from the Gulf, government offices in the Philippines have moved to a four-day work week, officials in Thailand and Vietnam have been encouraged to work from home and limit travel, and Myanmar’s government has imposed alternate driving days.

Governments are directly intervening in the market in an attempt to stabilize fuel prices.

Thai Prime Minister Anutin Charnvirakul announced a temporary price cap on diesel, while Vietnam began tapping its fuel price stabilization fund, state media said.

The moves are a foreshadowing of what could happen to the region if the strait is closed, said Priyanka Kishore, director and chief economist at Asia Decoded in Singapore.

“They are trying to manage the supply situation before it hits,” Kishore told Al Jazeera.

Despite having substantial amounts of fossil fuels, Southeast Asia is highly dependent on imported oil and gas, much of which passes through the Strait of Hormuz.

According to data from the US Energy Information Administration, about 84 percent of crude oil and 83 percent of liquefied natural gas (LNG) passing through the strait in 2024 are bound for Asia.

China, India, Japan and South Korea account for about 70 percent of oil shipments, with about 15 percent bound for the rest of Asia, according to the agency.

According to Aloysius Joko Purwanto, an economist at the Economic Research Institute for ASEAN and East Asia (ERIA) in Jakarta, the Philippines, Thailand, Malaysia and Brunei are among the economies most exposed to crude oil disruptions.

He cited data from the Joint Institutions Data Initiative, which found that the four countries rely on imports for 60-95 percent of their crude supply.

Oil-producing Indonesia also depends on imports for about a third of its crude oil, he said.

The supply chain shock has drawn attention to the region’s limited energy reserves, which face growing pressure every day the waterway remains closed.

Vietnam has announced plans to procure about 4 million barrels of crude oil from non-Middle Eastern countries.

Sam Reynolds, a researcher at the US-based Institute for Energy Economics and Financial Analysis, said this is equivalent to just six days of consumption for the country.

Based on state media reports that the country has up to 20 days in reserves, Reynolds said the country is “at high risk of fuel shortages without more crude inputs”.

Indonesia, Southeast Asia’s largest economy, maintains around 21-23 days of fuel reserves, according to local media.

Thai Energy Minister Aatpol Rerkpiboon said last week that the country had 65 days of reserves and the government would try to supply an additional 30 days.

The Philippines has 50-60 days of reserves, but of privately owned commercial stocks, Manila is relying on “excise duty reductions for petroleum products, additional imports from the Philippine National Oil Company and temporary appeals to private companies for release,” Reynolds said, referring to the state-run oil company.

“All countries are scrambling to replace disrupted supplies, but short-term alternatives are limited by refinery configurations and operational risks of using different crude grades, as well as shipping distances and costs,” Reynolds told Al Jazeera.

The emergency stocks of Southeast Asian countries are thin compared to their peers in Northeast Asia.

Japan has reserves of 254 days, while South Korea and China have reserves of around 208 and 120 days, respectively.

Part of the challenge is replacing dwindling crude oil supplies.

Economies should complement the petroleum products that come from refining crude oil, such as gasoline, diesel, jet fuel and petrochemicals.

Laos, Cambodia and Myanmar lack or have limited oil refining capacity, forcing them to rely on products exported from neighboring Thailand, Vietnam and Singapore, said ERIA’s Joko.

He said they will come under greater pressure as Asian oil refineries slow and restrictions on petroleum exports are imposed to preserve domestic oil supplies.

Thailand has already moved to ban oil exports except to Cambodia and Laos. China, another major regional supplier, has ordered state-owned companies to freeze energy exports.

Amid supply chain disruptions, petrochemical companies including Singapore’s Aster Chemicals & Energy and Indonesia’s PT Chandra Asri Pacific have begun declaring force majeure, indicating they may not be able to meet their contractual obligations.

On Tuesday, Thai petrochemicals firm Rayong Olefins, a unit of Siam Cement Group, said it would suspend plant operations because it could not get key raw materials such as naphtha and propane amid the closure of the Strait of Hormuz.

If the disruptions continue, the region is likely to face higher prices and more restrictions on oil and gas consumption.

The Economist Intelligence Unit said in a research note on Wednesday that it expects global oil prices to average US$80 per barrel in 2026, which, along with higher natural gas prices, “will push up inflation and dampen growth in Asia”.

Asia Decoded’s Kishore said the region could see the prospect of a recession if conditions do not improve in the coming weeks.

“In three weeks, or maybe two weeks, we’ll hear more about that,” he said.

“I think it’s a big ask if we haven’t seen anything through Hormuz yet.”