ASEAN Beat | Economy | Southeast Asia

In Southeast Asia, the Scramble for Energy Is On

With each nation exposed in different ways to global oil markets, the regional impact of the price shock is likely to be significant, but uneven.

The impacts of the global oil price shock continue to reverberate through Southeast Asia, bringing isolated fuel shortages, economic disruption, and a scramble for energy.

While most of the region’s nations rely on imported oil and gas, each Southeast Asian nation has its own unique mix of vulnerabilities in terms of fiscal capacity, national oil stocks, and reliance on oil and liquefied natural gas (LNG) imports through the Strait of Hormuz.

Of the region’s major economies, Indonesia is the most fiscally vulnerable, and Vietnam has the smallest known national oil reserve. The Philippines and Singapore are most reliant on imported energy, while Thailand is most exposed to Gulf oil imports in particular. And these will all likely fare better than the region’s poorest nations: Cambodia, Laos, Myanmar, and Timor-Leste.

ASEAN’s economic ministers warned this week that the supply disruptions “are leading to higher freight, insurance, and logistics costs and contribute to inflationary pressures on energy, food, and other essential goods” across Southeast Asia. If the current conflict is prolonged, it could “impact the livelihoods of millions of people in the region, and hinder economic progress in ASEAN.”

The oil supply crisis has already forced nations across the region to restrict fuel exports and depress demand by introducing four-day work weeks and COVID-19-style work-from-home arrangements, discouraging the public from using private vehicles, and reducing air conditioning use in government buildings.

It has also prompted a search for alternative supplies of energy, either by seeking out alternative sources of crude oil and refined fuels, or moving to energy sources less impacted by the Middle East conflict.

Among the primary alternative sources is Russia. Asia is expected to import a record volume of fuel oil from Russia in March, ​ after the U.S. government eased sanctions in order to reduce the pressure in international oil markets, with Singapore and Malaysia among the top recipients, according to Reuters. The Philippines and Indonesia are also considering importing fuel from Russia.

Nations including the Philippines and Thailand have increased coal-fired power and reduced activity at LNG-fired power plants, in light of the constrained LNG supply from Qatar and other Gulf nations. Vietnam’s national power utility told Reuters last week that it is also negotiating a coal supply in order to conserve LNG. The Thai government is also increasing the ratio of biofuels blends from 7 to 10 percent, while Indonesia is accelerating a biodiesel program that blends 50 percent palm-oil-based biodiesel with 50 percent conventional diesel.

As the Iran war nears the end of its third week, the price shock is now beginning to have significant impacts at the petrol pump. Fuel shortages have been reported in Laos, Cambodia, Myanmar, and Thailand, where some shops have reportedly put up “out of stock” signs and restricted sales.

Conflict-induced shortages are also beginning to reverberate through the region’s supply chains. Fertilizer makers in Malaysia are suspending new orders as supply-chain disruptions and feedstock shortages stemming from the Middle East ​conflict drive up raw material prices. This threatens to raise output costs for the country’s producers of palm oil, which could in turn have cascading effects through global supply chains. The country’s semiconductor firms are also concerned about disruptions in helium supplies, although this has yet to impact operations.

In Vietnam, where petrol prices have risen by around 30 percent and diesel prices by about 40 percent since the start of the Iran war, the government has encouraged people ​to work from home to ​cut fuel consumption. The country also faces potential flight reductions from next month after China and Thailand halted exports of jet fuel due to the war. The Philippine Senate granted President Ferdinand Marcos Jr. emergency powers to temporarily suspend or reduce excise taxes on oil in order to cushion the impacts of the price shock.

In Thailand, where Anutin Charnvirakul was yesterday reappointed as prime minister, the fuel shortage is spreading across the country, impacting the transport, tourism, and agriculture sectors. Fishermen are stuck at docks because of surging diesel prices, and farmers are struggling with diesel shortages and fertilizer hoarding. Operators of tourist boats in Phuket have been forced to hike their fees, while in Ayutthaya, the Thai Inquirer reports, “the Ayutthaya Elephant Palace & Royal Kraal has switched from trucks to walking elephants to conserve diesel.”

Significant stresses are likely to be felt first of all in the region’s least developed countries: Cambodia, Laos, Timor-Leste, and Myanmar. Cambodia, which experienced shortages of petrol last week, has been forced to import more fuel from suppliers in Singapore and Malaysia to make ‌up for supply shortfalls following China’s fuel export ban, and a similar move by Vietnam. Fuel shortages have been reported in Laos, where motorists have lined up for hours to fill their vehicles. The situation in Timor-Leste is reportedly stable. While motorists have been hit by rising fuel prices, the fuel importer Esperança Timor Oan  has assured the public that the country has “sufficient fuel reserves to supply public and private transport” for the next four months

In Myanmar, the ruling military junta introduced an “odds and evens” system of fuel rationing in the early days of the Iran war, concerned presumably about how shortages might impact its ability to keep up its military offensives against groups resisting its rule. According to the U.N., the oil shortages are “disrupting transport, businesses, and humanitarian operations,” putting additional pressure on a people who have already survived five years of conflict and economic contraction.

Of the region’s major economies, Thailand and the Philippines are the most vulnerable to rising food and energy costs, according to an analysis this week by the Institute of International Finance (IIF). While the two nations hold petrol reserves equivalent to 60 days of use, the two nations were among those that “have meaningful exposure to prolonged disruption in Gulf energy flows with limited fiscal space to absorb the shock,” the IIF stated.

Around 98 percent of the Philippines’ crude oil for domestic supply comes from the Middle East. Refined locally, this accounts for around 40 percent of the country’s domestic supply of petrol and diesel, with the remainder imported from other nations, including Singapore, South Korea, China, and Indonesia. Thailand currently imports around 50 percent of its crude oil from the Gulf.

Vietnam, too, is vulnerable given its high reliance on Middle Eastern oil – around 85 percent of its crude imports come from the Gulf, mostly from Kuwait – and its relatively thin “petroleum buffer.” The country has a dedicated national reserve that is equivalent to just nine days of net imports, with most reserves held by key petrol trading enterprises, which are required to maintain 20 days’ worth of reserves.

The region’s two net energy exporters – Brunei and Malaysia – are perhaps in the best position to weather the immediate crisis. Despite being a net exporter, Brunei does import crude and refined fuels from elsewhere, but relatively little of this comes from the Gulf. As a result, it faces “little immediate risk of fuel shortages, even during a prolonged disruption in Middle Eastern supply,” according to one analysis.

Like Brunei, Malaysia is also heavily reliant on imports from elsewhere, including the Gulf. The reason for this is that Malaysia chooses to export its own high-quality light sweet crude oil, which commands a higher price in global markets, and to import cheaper heavy crude oil, which it has the capacity to refine domestically.

This means that despite being Southeast Asia’s largest exporter of oil and gas, Malaysia is not insulated from global price shocks. This theoretically impacts its ability to maintain the generous fuel subsidies that cushion consumers from significant price rises. However, the government is in a relatively good fiscal position, and despite being forced to increase the price of certain fuels, it says it has the capacity to maintain its basic BUDI95 subsidy for the foreseeable future. As Lavanya Venkateswaran, a senior ASEAN economist at OCBC, noted this week, “Fiscal policy reforms over the past few years are bearing fruit, affording the government the policy room to adopt a wait-and-see approach.”

Indonesia falls somewhere in the middle. Southeast Asia’s largest oil producer by volume, the country is also forced to import large amounts of oil from elsewhere to meet domestic demand. While only around 25 percent of its crude comes from the Gulf, Indonesia maintains a generous subsidy that absorbs around 30 to 40 percent of the price of petrol and diesel for consumers. Unlike Malaysia, it is forced to operate in a more constrained fiscal space. Jakarta has set aside 381.3 trillion rupiah ($22.5 billion) for petrol and diesel subsidies in the 2026 national budget, but this was based on an assumption that crude oil would remain at around $70 per barrel. The current price is around $102.

As a result, it will be forced to bear an increasingly heavy fiscal burden to keep these subsidies in place as global oil prices rise. The state budget was already under pressure due to President Prabowo Subianto’s expensive social spending plans, including his multibillion-dollar free meals program. Without cutting subsidies, a prolonged supply crunch could push it past the legally mandated fiscal deficit ceiling of 3 percent of GDP.

As Channel News Asia noted, Prabowo’s administration now faces a choice between cutting fuel subsidies and risking political backlash, slashing spending on the free meals program, or overshooting the fiscal deficit ceiling, which could have ramifications in international markets.

Finally, there is Singapore, which is both uniquely reliant on oil imports and well-positioned to address the resulting challenges. Singapore generates 90 percent of its electricity from natural gas, nearly all of which is imported. Around 60 percent comes in the form of LNG, much of it imported from the Gulf, with the remainder coming via pipelines from Malaysia and Indonesia. At the same time, Singapore has ample fiscal capacity that puts it in a good position to weather the current crisis, even if the people of Singapore are likely to be burdened with significant cost of living increases.

“I want to assure all of our fellow Singaporeans that our energy is secure, even in the face of these disruptions,” Manpower Minister Tan See Leng said last week.

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The impacts of the global oil price shock continue to reverberate through Southeast Asia, bringing isolated fuel shortages, economic disruption, and a scramble for energy.

While most of the region’s nations rely on imported oil and gas, each Southeast Asian nation has its own unique mix of vulnerabilities in terms of fiscal capacity, national oil stocks, and reliance on oil and liquefied natural gas (LNG) imports through the Strait of Hormuz.

Of the region’s major economies, Indonesia is the most fiscally vulnerable, and Vietnam has the smallest known national oil reserve. The Philippines and Singapore are most reliant on imported energy, while Thailand is most exposed to Gulf oil imports in particular. And these will all likely fare better than the region’s poorest nations: Cambodia, Laos, Myanmar, and Timor-Leste.

ASEAN’s economic ministers warned this week that the supply disruptions “are leading to higher freight, insurance, and logistics costs and contribute to inflationary pressures on energy, food, and other essential goods” across Southeast Asia. If the current conflict is prolonged, it could “impact the livelihoods of millions of people in the region, and hinder economic progress in ASEAN.”

The oil supply crisis has already forced nations across the region to restrict fuel exports and depress demand by introducing four-day work weeks and COVID-19-style work-from-home arrangements, discouraging the public from using private vehicles, and reducing air conditioning use in government buildings.

It has also prompted a search for alternative supplies of energy, either by seeking out alternative sources of crude oil and refined fuels, or moving to energy sources less impacted by the Middle East conflict.

Among the primary alternative sources is Russia. Asia is expected to import a record volume of fuel oil from Russia in March, ​ after the U.S. government eased sanctions in order to reduce the pressure in international oil markets, with Singapore and Malaysia among the top recipients, according to Reuters. The Philippines and Indonesia are also considering importing fuel from Russia.

Nations including the Philippines and Thailand have increased coal-fired power and reduced activity at LNG-fired power plants, in light of the constrained LNG supply from Qatar and other Gulf nations. Vietnam’s national power utility told Reuters last week that it is also negotiating a coal supply in order to conserve LNG. The Thai government is also increasing the ratio of biofuels blends from 7 to 10 percent, while Indonesia is accelerating a biodiesel program that blends 50 percent palm-oil-based biodiesel with 50 percent conventional diesel.

As the Iran war nears the end of its third week, the price shock is now beginning to have significant impacts at the petrol pump. Fuel shortages have been reported in Laos, Cambodia, Myanmar, and Thailand, where some shops have reportedly put up “out of stock” signs and restricted sales.

Conflict-induced shortages are also beginning to reverberate through the region’s supply chains. Fertilizer makers in Malaysia are suspending new orders as supply-chain disruptions and feedstock shortages stemming from the Middle East ​conflict drive up raw material prices. This threatens to raise output costs for the country’s producers of palm oil, which could in turn have cascading effects through global supply chains. The country’s semiconductor firms are also concerned about disruptions in helium supplies, although this has yet to impact operations.

In Vietnam, where petrol prices have risen by around 30 percent and diesel prices by about 40 percent since the start of the Iran war, the government has encouraged people ​to work from home to ​cut fuel consumption. The country also faces potential flight reductions from next month after China and Thailand halted exports of jet fuel due to the war. The Philippine Senate granted President Ferdinand Marcos Jr. emergency powers to temporarily suspend or reduce excise taxes on oil in order to cushion the impacts of the price shock.

In Thailand, where Anutin Charnvirakul was yesterday reappointed as prime minister, the fuel shortage is spreading across the country, impacting the transport, tourism, and agriculture sectors. Fishermen are stuck at docks because of surging diesel prices, and farmers are struggling with diesel shortages and fertilizer hoarding. Operators of tourist boats in Phuket have been forced to hike their fees, while in Ayutthaya, the Thai Inquirer reports, “the Ayutthaya Elephant Palace & Royal Kraal has switched from trucks to walking elephants to conserve diesel.”

Significant stresses are likely to be felt first of all in the region’s least developed countries: Cambodia, Laos, Timor-Leste, and Myanmar. Cambodia, which experienced shortages of petrol last week, has been forced to import more fuel from suppliers in Singapore and Malaysia to make ‌up for supply shortfalls following China’s fuel export ban, and a similar move by Vietnam. Fuel shortages have been reported in Laos, where motorists have lined up for hours to fill their vehicles. The situation in Timor-Leste is reportedly stable. While motorists have been hit by rising fuel prices, the fuel importer Esperança Timor Oan  has assured the public that the country has “sufficient fuel reserves to supply public and private transport” for the next four months

In Myanmar, the ruling military junta introduced an “odds and evens” system of fuel rationing in the early days of the Iran war, concerned presumably about how shortages might impact its ability to keep up its military offensives against groups resisting its rule. According to the U.N., the oil shortages are “disrupting transport, businesses, and humanitarian operations,” putting additional pressure on a people who have already survived five years of conflict and economic contraction.

Of the region’s major economies, Thailand and the Philippines are the most vulnerable to rising food and energy costs, according to an analysis this week by the Institute of International Finance (IIF). While the two nations hold petrol reserves equivalent to 60 days of use, the two nations were among those that “have meaningful exposure to prolonged disruption in Gulf energy flows with limited fiscal space to absorb the shock,” the IIF stated.

Around 98 percent of the Philippines’ crude oil for domestic supply comes from the Middle East. Refined locally, this accounts for around 40 percent of the country’s domestic supply of petrol and diesel, with the remainder imported from other nations, including Singapore, South Korea, China, and Indonesia. Thailand currently imports around 50 percent of its crude oil from the Gulf.

Vietnam, too, is vulnerable given its high reliance on Middle Eastern oil – around 85 percent of its crude imports come from the Gulf, mostly from Kuwait – and its relatively thin “petroleum buffer.” The country has a dedicated national reserve that is equivalent to just nine days of net imports, with most reserves held by key petrol trading enterprises, which are required to maintain 20 days’ worth of reserves.

The region’s two net energy exporters – Brunei and Malaysia – are perhaps in the best position to weather the immediate crisis. Despite being a net exporter, Brunei does import crude and refined fuels from elsewhere, but relatively little of this comes from the Gulf. As a result, it faces “little immediate risk of fuel shortages, even during a prolonged disruption in Middle Eastern supply,” according to one analysis.

Like Brunei, Malaysia is also heavily reliant on imports from elsewhere, including the Gulf. The reason for this is that Malaysia chooses to export its own high-quality light sweet crude oil, which commands a higher price in global markets, and to import cheaper heavy crude oil, which it has the capacity to refine domestically.

This means that despite being Southeast Asia’s largest exporter of oil and gas, Malaysia is not insulated from global price shocks. This theoretically impacts its ability to maintain the generous fuel subsidies that cushion consumers from significant price rises. However, the government is in a relatively good fiscal position, and despite being forced to increase the price of certain fuels, it says it has the capacity to maintain its basic BUDI95 subsidy for the foreseeable future. As Lavanya Venkateswaran, a senior ASEAN economist at OCBC, noted this week, “Fiscal policy reforms over the past few years are bearing fruit, affording the government the policy room to adopt a wait-and-see approach.”

Indonesia falls somewhere in the middle. Southeast Asia’s largest oil producer by volume, the country is also forced to import large amounts of oil from elsewhere to meet domestic demand. While only around 25 percent of its crude comes from the Gulf, Indonesia maintains a generous subsidy that absorbs around 30 to 40 percent of the price of petrol and diesel for consumers. Unlike Malaysia, it is forced to operate in a more constrained fiscal space. Jakarta has set aside 381.3 trillion rupiah ($22.5 billion) for petrol and diesel subsidies in the 2026 national budget, but this was based on an assumption that crude oil would remain at around $70 per barrel. The current price is around $102.

As a result, it will be forced to bear an increasingly heavy fiscal burden to keep these subsidies in place as global oil prices rise. The state budget was already under pressure due to President Prabowo Subianto’s expensive social spending plans, including his multibillion-dollar free meals program. Without cutting subsidies, a prolonged supply crunch could push it past the legally mandated fiscal deficit ceiling of 3 percent of GDP.

As Channel News Asia noted, Prabowo’s administration now faces a choice between cutting fuel subsidies and risking political backlash, slashing spending on the free meals program, or overshooting the fiscal deficit ceiling, which could have ramifications in international markets.

Finally, there is Singapore, which is both uniquely reliant on oil imports and well-positioned to address the resulting challenges. Singapore generates 90 percent of its electricity from natural gas, nearly all of which is imported. Around 60 percent comes in the form of LNG, much of it imported from the Gulf, with the remainder coming via pipelines from Malaysia and Indonesia. At the same time, Singapore has ample fiscal capacity that puts it in a good position to weather the current crisis, even if the people of Singapore are likely to be burdened with significant cost of living increases.

“I want to assure all of our fellow Singaporeans that our energy is secure, even in the face of these disruptions,” Manpower Minister Tan See Leng said last week.

Sebastian Strangio is Southeast Asia editor at The Diplomat. 

Southeast Asia economies

U.S.-Israel war on Iran

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