Asia's early defenses against the energy shock caused by the Iran war are running out, and a more consequential second wave of impacts is now taking hold across the region, according to a report by ABC News.
When the war began, governments scrambled to adapt to the closure of the Strait of Hormuz, a critical shipping artery for energy flowing to Asia. They drew down stockpiles, cut power consumption, and redirected fuel supplies, all on the assumption the conflict would be brief. It has not been.
With no clear end in sight, the fuel crisis is rippling across economies. Airfare costs, shipping rates and utility bills are climbing. About 8.8 million people are in danger of being pushed into poverty, and the conflict may cause $299 billion in economic losses to the Asia-Pacific region, according to the United Nations Development Program.
"The countries with the least resources to respond, or the consumers who can least afford to pay, are the ones who feel everything first," said Samantha Gross of the U.S.-based think tank Brookings Institution.
Asian governments had planned their budgets assuming oil would average around $70 a barrel, using subsidies to keep fuel prices stable for consumers. The war pushed the price of Brent crude to as high as about $120 a barrel. Governments now face a choice between maintaining costly subsidies that strain public finances or cutting them and passing higher costs to consumers. Ahmad Rafdi Endut, a Kuala Lumpur-based independent energy analyst, described that choice as stark.
The consequences are playing out differently across the region. In India, early efforts to redirect fuel supplies toward cooking gas for roughly 330 million households cut into supplies for fertilizer plants. On Sunday, Prime Minister Narendra Modi urged citizens to buy locally, cut down on travel abroad to save dollars, work from home, use public transport, and asked farmers to halve fertilizer use. Surging fertilizer prices and warnings of weak rainfall in an El Nino year are a particular concern for the world's largest rice exporter.
The Philippines shifted quickly to a four-day work week to reduce fuel consumption and rolled out targeted subsidies for poorer households. However, Fitch Ratings noted that most consumers are still paying higher energy costs, causing business activity to slow in major cities like Manila. Thailand abandoned its diesel price cap less than a month after the conflict began after its fuel subsidies ran out and is now cutting other spending to manage higher oil prices.
