Asian Nations Implement Diverse Measures Amidst Energy Supply Concerns and Geopolitical Tensions

Amid rising oil prices and concerns over energy supply disruptions stemming from escalating geopolitical tensions, particularly impacting transit through the Strait of Hormuz, several Asian governments are implementing a range of measures. These actions include fuel price caps, increased subsidies, export restrictions, strategic reserve releases, and energy conservation initiatives across public and private sectors.

The International Energy Agency has characterized the situation as causing the largest supply disruption in the history of the global oil market.

Context of Energy Disruptions

Global oil prices have increased, and share markets have declined due to geopolitical tensions in the Middle East, specifically involving Iran. These developments have impacted energy shipments through the Strait of Hormuz, a critical maritime route that accounts for approximately one-fifth of global crude oil and liquefied natural gas trade.

International Brent crude oil prices have surpassed $100 a barrel, with some reports indicating brief surges exceeding $170 a barrel. Asian nations are particularly susceptible to these disruptions due to their heavy reliance on imported fuel that often transits through this strait.

Regional Responses to Energy Challenges

Governments across Asia are evaluating strategic oil reserves, implementing energy conservation measures, and attempting to mitigate rising prices for consumers and industries.

President Lee Jae Myung announced plans to cap domestic fuel prices, a measure not implemented in nearly three decades. The country also intends to explore energy sources beyond the Strait of Hormuz and may expand its 100 trillion won ($95.6 billion) market-stabilization program as needed. The government and central bank were called upon to prepare for financial and foreign exchange market volatility. South Korea plans to release 22.46 million barrels from its reserves as part of a coordinated international stock draw.

The government has instructed a national oil reserve storage site to prepare for a potential release of crude oil, though specific timing details remain undisclosed. Oil prices in Japan rose over 25 percent, reaching levels not observed since mid-2022. Prime Minister Sanae Takaichi stated the government was considering steps to manage the cost impact of gasoline prices on the public, potentially utilizing reserves.

Japan possesses a substantial strategic oil stockpile, equivalent to approximately 254 days of supply, and has begun releasing about 45 days' worth of reserves to prevent fuel price surges. This action, last taken after the 2022 invasion of Ukraine, aims to support Japan's energy-intensive industries. Finance ministers from the Group of Seven (G7), including Japan, have expressed readiness to implement "necessary measures" for surging global oil prices.

French Finance Minister Roland Lescure confirmed a G7 agreement to use "any necessary tools," including "potential release of necessary stockpiles." Prime Minister Takaichi is also expected to discuss purchasing additional American liquefied natural gas (LNG) and reactivating nuclear power plants.

Sources familiar with the matter reported that China has requested refiners to cease signing new fuel export contracts and to attempt to cancel existing commitments. This directive does not apply to jet fuel for international flights, bonded bunkering, or supplies to Hong Kong or Macau.

The finance minister announced an increase in the allocated fuel subsidies within the state budget. The country has allocated 381.3 trillion rupiah ($32 billion) for energy subsidies and compensation for state firms Pertamina and PLN, aiming to maintain affordable fuel prices and electricity tariffs. The deputy energy minister stated that Indonesia might revive a plan to launch a mandatory B50 grade of palm oil-based biodiesel sooner than initially planned due to surging crude oil prices. Indonesia operates with a limited 20-day fuel reserve, and the government has committed to maintaining fuel prices through Eid al-Fitr, with uncertainty regarding prices thereafter.

President Ferdinand Marcos Jr. ordered a temporary implementation of a four-day work week for selected executive branch offices to conserve energy and reduce fuel use. This policy extends to all national government agencies, government-owned or controlled corporations, local government units, constitutional bodies, state universities and colleges, and other government instrumentalities. The directive emphasized the need for strict energy conservation measures and optimizing public resources, with government agencies instructed to cut electricity and fuel consumption by 10 to 20 percent. Offices were also instructed to power down computers during lunch breaks and maintain air conditioning at or above 24°C (75°F).

The government announced plans to remove import tariffs on fuels to secure supplies, with the measure anticipated to remain in effect until the end of April. Citizens were also advised to work from home and reduce vehicle usage. Vietnam has requested refineries and fuel distributors to maintain high fuel supplies.

The country is utilizing its approximately two-month oil reserve and exploring domestic energy sources, while also employing price supports to protect households. The prime minister urged officials to use stairs instead of elevators. Thailand's decision to halt fuel exports contributed to shortages in Cambodia, resulting in the closure of nearly a third of Cambodia's approximately 6,000 gas stations.

Indian companies raised the prices of liquefied petroleum gas (LPG), primarily used for cooking, for the first time in approximately a year. Indian Oil Corp (IOC) increased the price of a 14.2-kg LPG cylinder in Delhi by 7 percent to 913 rupees ($14). India, the world's second-largest LPG importer, consumed 33.15 million metric tons last year, with imports accounting for about two-thirds, predominantly from the Middle East. India invoked emergency powers, directing refineries to maximize LPG production and prioritize essential services like hospitals. The government has absorbed over half of the price increase driven by global market disruptions to keep costs low for poorer households. Two Indian tankers carrying gas supplies successfully navigated through the Strait of Hormuz after direct negotiations with Iran, arriving in India.

To conserve electricity and fuel, Bangladesh closed all universities, bringing forward the Eid al-Fitr holidays as an emergency measure. The nation also implemented daily limits on fuel sales following increased purchases. Bangladesh, which imports 95 percent of its oil and gas, saw its national oil company, Bangladesh Petroleum Corporation (BPC), restrict sales for most vehicles, such as limiting motorcyclists to 2 liters per tank. The country also initiated scheduled power blackouts to preserve fuel for its garment factories.

The nation experienced long queues at fuel stations amidst concerns about oil shortages. Sri Lanka, which imports all its oil and coal, implemented a four-day work week for state institutions, schools, and universities, starting indefinitely on a Wednesday, to conserve fuel reserves. Civil servants were advised to work from home where feasible, and the private sector has been encouraged to adopt a similar four-day work week. Fuel rationing commenced, limiting motorists to 15 liters of petrol or diesel weekly, while public transport was allocated up to 200 liters. Officials stated that current petrol and diesel reserves could last approximately six weeks.

Pakistan increased petrol and diesel prices by 55 rupees ($0.28) per liter, marking the largest increase on record. Prime Minister Shehbaz Sharif stated these decisions were made to stabilize the economy, acknowledging limited control over global fuel prices. Ahead of the price increase, fuel stations in major cities experienced long queues. The prime minister also announced school closures for two weeks and a shift to online classes for universities to reduce commuting. Government departments will face a 50 percent cut in fuel allowances for two months, and 60 percent of official vehicles, excluding buses and ambulances, will be removed from service. Pakistan imports 85% of its oil, primarily from Saudi Arabia and the UAE, via the Strait of Hormuz.

Individuals queued at gas-filling stations for cooking gas. The country's primary oil company announced it would fill LPG cylinders to half capacity to extend existing stocks.

Expert Commentary and Outlook

Analysts note that tapping strategic reserves offers a temporary solution, as it does not increase a country's overall supply unless oil is acquired from other nations. If the crisis persists, crude oil shortages could recur, and refineries might need to reduce production. Even minor constraints on energy use can impede industrial activity, particularly for energy-intensive export industries.

The situation presents significant challenges, with "no easy decision for the short term," according to one expert. Similar challenges are predicted to affect fuel-importing economies beyond Asia, including in Africa, as countries compete for limited resources.

International Response

The European Union is intensifying its long-term clean energy strategy to reduce consumption and manage rising prices across its 27 member states. Officials convened to explore methods for enhancing the region's energy security. European Commissioner for Energy Dan Jørgensen stated that the EU is examining ways to reduce energy bills and is working on immediate measures to support businesses and vulnerable citizens.