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Southeast Asia and the Middle East Energy Shock

Countries across the region have banned fuel exports and are attempting to reduce fuel consumption in anticipation of a regional energy crunch.

A Pertamina gas station in Yogyakarta, Indonesia, June 23, 2023.

The Middle East is a major global source of energy, particularly crude oil and natural gas. Not only have major suppliers of oil and gas like Saudi Arabia, Qatar, and the UAE suspended some operations as a result of the U.S. military strikes on Iran, but tankers carrying fuel to various parts of the world are unwilling to sail through the Strait of Hormuz at the moment. This has choked off a considerable amount of the world’s supply of crude oil and gas.

As I write this, we do not know how long this state of affairs will last and that uncertainty is causing sell-offs in some markets and pushing up energy prices. The fear is that a sustained campaign involving most of the big energy-producing states of the Middle East will send energy prices skyrocketing and lead to shortages. Let’s unpack this a little with respect to Southeast Asia.

First of all, when we talk about energy, we are talking primarily about three commodities: crude oil, refined petroleum products, and petroleum gas such as liquefied natural gas. The Middle East is a major exporter of crude oil. According to the Atlas of Economic Complexity, Saudi Arabia and the UAE accounted for $208 billion in crude oil exports in 2024, roughly 21 percent of global supply. Choking off this amount of crude at the source for an unknown amount of time is certainly going to cause price volatility and strain supply chains. But it will impact countries unevenly.

Refineries won’t be able to get the crude they need to produce gasoline, and companies that rely on petroleum feedstock will also have to ramp down or look for alternative suppliers at higher prices. We have already seen several petrochemical giants in Southeast Asia declare force majeure, which gives them legal protection if they are unable to meet contractual obligations.

Countries that are big importers of oil (both crude and refined) and natural........

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