Asia's vulnerability to energy shocks is deepening as the Iran war continues, and initial defenses are wearing thin.
The closure of the Strait of Hormuz has disrupted energy supplies, forcing governments to make tough decisions regarding energy allocation.
Short-term measures, such as power conservation and fuel prioritization, are proving inadequate as the crisis stretches on.
Economic Impact of the Energy Crisis
The United Nations Development Program estimates that the conflict could result in $299 billion in economic losses across the Asia-Pacific.
The consumers who can least afford to pay are the ones who feel everything first.
Samantha Gross, Brookings Institution
Countries had anticipated oil prices to average around $70 per barrel, but Brent crude has surged to approximately $120.
Governments face a difficult choice: maintain costly subsidies or pass higher costs onto consumers, risking public discontent.
Consequences for Asia's Economies
In India, fuel supplies have been redirected to households, impacting fertilizer production, essential for agriculture.
Meanwhile, the Philippines has adopted a four-day work week to conserve fuel, but business activities are still declining.
Thailand has removed its diesel price cap due to exhausted subsidies, while Vietnam faces jet fuel shortages affecting tourism.
Long-Term Solutions and Challenges
Governments must weigh the implications of maintaining subsidies against the risk of inflation and public unrest.
The end of the war will not bring immediate relief; rebuilding supply chains and infrastructure will take time.
Experts warn that Southeast Asia is currently experiencing the most significant impact from rising fuel shortages.
This fuel shortage situation is going to get worse.
Henning Gloystein, Eurasia Group
The crisis underscores the fragility of Asia's burgeoning middle class, with many at risk of reverting to poverty.
Countries are exploring long-term strategies, including diversifying energy sources and investing in renewables.