Asia Grapples with Oil Price Shock: Emergency Measures Implemented

As the U.S.-Israeli war with Iran disrupts global oil supplies, Asian countries are taking drastic steps to mitigate the effects of surging oil prices and potential shortages

The fallout from the conflict is being felt sharply in Asia, with authorities from New Delhi to Manila implementing emergency measures to shield consumers from mounting shortages and surging oil prices. On Friday, people in Nepal lined up at gas-filling stations, carrying their empty, red cooking-gas cylinders as the country’s main oil company said it would only fill them halfway with LPG, or liquefied petroleum gas, as it tries to make stocks last longer. Neighboring India, which is the world’s second-largest importer of LPG after China, is grappling with panic-buying among its own citizens amid wild swings in the price of international Brent crude oil, which as of early Friday was above $100 a barrel.

Regional Dependence on Oil Imports

Unlike the U.S. or Europe, which have more diverse sources of oil, Asia relies heavily on imports that pass through the Strait of Hormuz, a key shipping route along southern Iran that carries about a fifth of the world’s oil. The ability to refine different oils from different places is complicated and not easily shifted in Asia, according to Robert Savage, the head of markets strategy and insight at Bank of New York Mellon. Among the countries most affected are Singapore, Thailand, South Korea, Pakistan, and Japan, according to a research note from Eurasia Group, a New York-based geopolitical risk analysis firm.

Government Responses to the Crisis

The escalating conflict in the Middle East has set off an energy frenzy across the continent, forcing governments to ration fuel and scramble for alternative supplies. In India, which has invoked emergency powers directing refineries to maximize LPG production, oil companies say they are focused on ensuring the stability of domestic supplies, including to essential services such as hospitals. Though authorities have said the measures are precautionary and that India has plenty of oil, panic-buying threatens to strain domestic resources. India is also facing additional pressure from its South Asian neighbors, with Bangladesh, Sri Lanka, and the Maldives requesting supplies from New Delhi.

Conservation Efforts and Economic Impact

In Southeast Asia, the Philippines has initiated a four-day workweek for government employees, while Vietnam has urged its citizens to work from home and limit vehicle usage. Thailand said it had halted most of its energy exports, with the country’s energy minister saying fuel reserves would be tripled to 3%. Officials also ordered austerity measures to conserve energy, including having government employees work from home and urging people to use the stairs instead of elevators. Major Asian airlines, including Air India and Hong Kong’s Cathay Pacific, have almost doubled the fuel surcharge paid by passengers to account for fluctuations in energy prices. The Iran conflict has been especially brutal for U.S. ally South Korea, which imports 70% of its oil from the Middle East, with its stock markets experiencing some of the world’s steepest falls this month. To offset the impact of higher prices for these fuels, Korea will likely ramp up nuclear and coal-fired power plant production.

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