Oil Crisis and Asia's Response: A Region on Edge

"The largest supply disruption in the history of the global oil market."
— International Energy Agency

The Crisis Unfolds

Oil prices have surged and share markets have declined as concerns mount over energy supply disruptions linked to escalating geopolitical tensions involving Iran, the United States, and Israel. The crisis has centered on the Strait of Hormuz, a critical energy shipping route that has been blockaded by Iran for two weeks in retaliation for US and Israeli air strikes.

Most of the oil and gas transiting the Strait of Hormuz was Asia-bound. According to Eurasia Group research, Singapore, Thailand, South Korea, Pakistan, and Japan are among the most affected countries.

South Korea: Emergency Price Controls

President Lee Jae Myung announced plans to cap domestic fuel prices — a measure not seen in nearly 30 years. During an emergency meeting, Mr. Lee stated that a maximum price system would be introduced for petroleum products with "excessive price increases."

Key measures include:

• Seeking alternative energy sources beyond those transiting the Strait of Hormuz
• A 100 trillion won ($95.6–$96 billion) market-stabilization program, expandable if necessary
• Plans to release 22.46 million barrels from reserves as part of the IEA's coordinated stock draw

Indonesia: Subsidies and Biodiesel Acceleration

The finance minister announced an increased state budget allocation for fuel subsidies, with 381.3 trillion rupiah ($32 billion) budgeted for energy subsidies and compensation to state-owned firms Pertamina and PLN for maintaining affordable fuel prices and electricity tariffs.

Deputy energy minister Yuliot Tanjung stated that Indonesia might revive plans for mandatory B50 palm oil-based biodiesel sooner than originally planned due to surging crude oil prices. A decision has not yet been made, with current plans for B40 until the end of 2026.

Indonesia is also looking to buy oil from Africa and Latin America, with plans to purchase 150 million barrels from Russia by year-end.

China: Export Restrictions

China has requested refiners to stop entering new fuel export contracts and to attempt canceling existing commitments, according to sources familiar with the matter. This guidance does not apply to jet fuel for international flights, bonded bunkering, or supplies to Hong Kong or Macau.

Japan: Reserves and Price Prevention

Prime Minister Sanae Takaichi stated the government was considering steps to prevent gasoline prices from becoming "intolerable for the public," potentially utilizing reserves. Ms. Takaichi ruled out overhauling the draft fiscal 2026 budget or compiling a stopgap budget for these measures.

Japan began releasing approximately 45 days' worth of oil reserves to prevent fuel price surges as crude oil imports slowed. The country, which sources about 95% of its oil from the Middle East, has purchased more from the United States — paying spot market prices plus significantly higher shipping costs.

Japan's primary defense is a substantial strategic oil stockpile, equivalent to about 254 days of supply, established after the 1970s Arab oil crisis.

Bangladesh: Closures and Rationing

Bangladesh closed all universities and brought forward the Eid al-Fitr holidays as an emergency measure to conserve electricity and fuel. The nation, which imports 95 percent of its oil and gas, implemented daily limits on fuel sales after panic buying.

The national oil company, Bangladesh Petroleum Corporation (BPC), restricted sales for most vehicles — for instance, limiting motorcyclists to 2 liters per tank. Long queues formed at petrol stations in Dhaka following the restrictions.

An industrial economist noted that the measures were "partially effective" and that Bangladesh was seeking "alternative sources" for fuel, including from Southeast Asian countries. Scheduled power blackouts were initiated to preserve fuel for its garment factories.

Vietnam: Tariff Removal and Work-From-Home

The government announced plans to remove import tariffs on fuels to ensure adequate supplies amid disruptions. This measure is expected to be in effect until the end of April.

The government requested refineries and fuel distributors to maintain high fuel supplies and advised citizens to work from home and reduce vehicle usage. Vietnamese EV maker VinFast is offering discounts to offset fuel price impacts.

Philippines: Four-Day Work Week

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. The policy extends to all national government agencies, government-owned corporations, local government units, and other government instrumentalities.

Government agencies were instructed to cut electricity and fuel consumption by 10 to 20 percent.

Pakistan: "Difficult Decisions"

Prime Minister Shehbaz Sharif stated that "difficult decisions" were made to stabilize the economy, acknowledging limited control over global fuel prices. Petrol and diesel prices were increased by 55 rupees ($0.28) per litre — the largest increase on record.

Additional measures include:

• School closures for two weeks and a shift to online classes for universities to reduce commuting
• A 50 percent cut in fuel allowances for government departments for two months
• 60 percent of official vehicles removed from service, excluding buses and ambulances
• Weekly reassessment of prices

Pakistan sources 85% of its energy imports via the Strait of Hormuz and is reportedly paying about $30 million above pre-war market rates to secure liquefied natural gas supplies after its supply was cut off from Qatar.

India: LPG Price Hike and Emergency Powers

Indian companies raised the prices of liquefied petroleum gas (LPG) for the first time in approximately a year. Indian Oil Corp 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 of cooking gas last year, with imports accounting for about two-thirds. Middle Eastern LPG comprises 85 to 90 percent of these imports.

India invoked emergency powers, directing refineries to maximize LPG production and prioritize essential services like hospitals. Prime Minister Narendra Modi issued statements to reassure the public, stating there was no need to panic. He called on citizens to work from home, avoid non-essential travel, and stop buying gold as energy costs continue to rise.

India is also receiving requests for supplies from its South Asian neighbors, including Bangladesh, Sri Lanka, and the Maldives.

Sri Lanka: Rationing and Four-Day Week

Long queues formed at fuel stations amidst concerns about oil shortages. The nation, recovering from a 2022 financial crisis, is currently supported by an International Monetary Fund (IMF) loan program.

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 were projected to last approximately six weeks.

Sri Lanka implemented a four-day work week for state institutions to conserve scarce fuel reserves. State institutions, schools, and universities will operate four days a week indefinitely. President Anura Kumara Dissanayake stated that essential services, including hospitals, ports, and emergency services, will maintain their regular operations.

Thailand: Small Steps, Big Impacts

The prime minister urged officials to use stairs instead of elevators. Thailand is utilizing its approximately two-month oil reserve and exploring domestic energy sources, while also employing price supports to protect households from rising costs.

Thailand's decision to halt exports contributed to shortages in Cambodia, resulting in the closure of nearly a third of its roughly 6,000 gas stations.

Nepal: Half-Filled Cylinders

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.

Global Context: Europe and G7 Response

The European Union is intensifying its long-term clean energy strategy to reduce consumption and manage rising prices across its 27 member states. European Commissioner for Energy Dan Jørgensen stated, "We are looking at how we can reduce people's energy bills."

Finance ministers from the Group of Seven (G7) expressed readiness to implement "necessary measures" for surging global oil prices but did not commit to releasing emergency reserves, despite crude prices briefly exceeding $170 a barrel.

Overall oil imports to Asia fell sharply in April following nearly two months of disruption to shipping through the Strait of Hormuz. Vietnam, Thailand, the Philippines, and Sri Lanka are among countries actively seeking Russian oil as they suffer shortages.

China's Renewable Energy Sector: A Strategic Advantage

Global energy disruptions are accelerating a shift toward clean technologies and renewable power, and China maintains a dominant manufacturing position in batteries, solar panels, and electric vehicles.

According to the International Energy Agency, China accounts for over 70% of global electric vehicle manufacturing and about 85% of global battery cell production.

Chinese companies BYD (vehicle-maker) and CATL (battery-producer) are positioned to benefit from increased interest in low-emissions energy products. In March, shares of CATL and BYD traded in Hong Kong rose by approximately 24% and 11%, respectively.

Chinese exports of solar panels, batteries, and electric cars reached a record of approximately $22.3 billion in December — an increase of about 47% from the previous year.

Global Market Shifts

• Pakistan: A previous renewable energy rollout involved the import of more than 50 gigawatts of Chinese solar panels by December 2025. Analysts estimate that solar power could save Pakistan $6.3 billion in fossil fuel imports over the next year.
• United Kingdom: EV leasing demand increased by more than a third in the first three weeks of March compared to February.
• Indonesia: The world's largest coal exporter announced plans to push into electric vehicle production and expand charging infrastructure.
• Southeast Asia: Vietnamese EV maker VinFast is offering discounts in response to fuel price shocks.

Analyst Perspectives

Sam Reynolds of the Institute for Energy Economics and Financial Analysis stated: "China's approach to energy sector development and geopolitics has been completely validated by the Iran conflict."

Li Shuo of the Asia Society Policy Institute's China Climate Hub said China is "at the very forefront of this, more so than any other countries in the world, certainly more so than the United States."

Amy Myers Jaffe of New York University's Center for Global Affairs said the energy shock is "going to help the Chinese industry globally and hurt the American car industry globally."

Background

China's current five-year plan prioritizes renewable energy industries. Over a decade ago, Chinese policy merged energy security with national security. The United States, meanwhile, remains the world's top oil producer and has promoted fossil fuel exports, while high U.S. tariffs have largely prevented Chinese electric vehicles from entering the American market.