Asia’s energy-importing economies are scrambling to contain the impact of a widening Middle East war that has upended oil and gas markets and is now battering ordinary buyers, from farmers to car manufacturers and crematorium operators.
During an emergency meeting on Monday, South Korea’s President Lee Jae Myung became the latest to call for a swift cap on fuel prices — a step the government could take this week. Taiwan, which also depends almost entirely on energy imports, has already set a weekly limit on oil-price increases, while Japan’s prime minister has said the country is examining measures to ensure gasoline prices do not exceed acceptable levels.
"Governments can use subsidies in the short term to protect end-users,” said Masanori Odaka, an analyst at Rystad Energy. "But this comes at a cost, because you’re borrowing from the future to keep the near-term price suppressed.”
Since US and Israeli strikes on Iran began 11 days ago, upheaval has spread across the Arabian Gulf and beyond, shuttering production at major suppliers and export facilities, and effectively halting transit through the Strait of Hormuz, a key maritime chokepoint.
As the region most dependent on those oil, gas and fuel flows, Asia has been on edge after a weekend of bad news led to a spike in prices, pushing oil close to $120 a barrel in early trade. For many in an energy-hungry region, a crisis thousands of miles away already feels far too real.
From Bangladesh to Thailand and Singapore, drivers rushed to fill tanks, fearing disruption and higher costs ahead, despite reassuring official comments on supply and efforts to stop price gouging. In Vietnam, diesel alone has surged almost 57% since late February, and dozens of petrol stations have shortened operating hours or temporarily halted sales to cope with the rush, according to local reports.
In Australia, the government has sought to reassure buyers including farmers, who are eyeing availability of diesel and other fuels, with their crucial winter crop potentially less than a month away. Energy Minister Chris Bowen said there was no supply problem, but "a huge spike in demand.”
South Asia’s price-sensitive buyers are among the worst hit. At least one province in Pakistan has curbed civil servants’ travel and the government has directed officials to draw up an austerity and savings plan within 48 hours. India has benefited from a US waiver providing access to Russian crude — but has struggled to alleviate pressure in liquefied petroleum gas, used for cooking, and liquefied natural gas, used from power production to manufacturing.
"People don’t panic because crude is $120, they panic when the kitchen bill jumps,” said Chanchal Agarwal, an independent investment advisor based in Mumbai. "The Indian government has historically used subsidies to cushion the impact of rising LPG prices. However, the extent to which it can continue to do so without significant fiscal strain is a critical question.”
Industrial gas users are already seeing the impact of shortfalls.
In the western Indian state of Gujarat, curtailed supplies from the local gas distributor have hit auto and other manufacturers operating in a pipeline-connected industrial hotspot where few hold extensive reserves. Top producer Maruti Suzuki India Ltd, which makes one in every two cars sold in the country, has been quizzing suppliers in Gujarat and near Delhi over backup plans, including a potential partial return to furnace oil, according to people with knowledge of the situation. They asked not to be named as the conversations are not public.
Maruti’s "supplier partners are free to choose their energy sources depending upon their specific context,” a company spokesperson said in an emailed response.
Heavyweight Tata Motors, meanwhile, is being forced to consider introducing substitutes like propane and LPG for its paint-shop ovens in the area, according to people involved in operation, a move likely to drive up costs. India imports more than 90% of its LPG supply from the Middle East.
Further south, the city of Pune has curtailed cremations that rely on LPG. Wood remains the most commonly used fuel for the Hindu cremation rituals, but gas, as a cleaner option, has been on the rise.
"LPG cremation facilities will stop from today, because we had stock to last until yesterday,” said Manisha Shekatkar, a chief engineer at Pune Municipal Corp. "The facilities will remain stopped until further notice from the central government.”
The historic energy crunch has left some countries, including South Korea, to consider the option of drawing on petroleum reserves. Japanese refiners have also asked for just such a measure, and Group of Seven finance ministers will discuss a coordinated joint release later on Monday. Such coordinated drawdowns are rare, though there were two in the immediate aftermath of Russia’s invasion of Ukraine.
Thailand and Vietnam, meanwhile, are seeking oil and gas supplies from regional neighbors, including Malaysia and Brunei, according to people with knowledge of the discussions. Vietnam has also sought to ease restrictions in order to allow state-owned buyers to procure more fuel.