War with Iran chokes flows of oil and natural gas, highlighting energy security risks for Asia
“It is therefore unlikely that China would struggle to source enough crude to power its economy or meet domestic demand,” said Muyu Xu, a senior crude oil analyst at Kpler. “The real question is at what price.”
India might resume purchases of Russian crude oil, despite pressure from Trump not to.
It has enough crude reserves to last less than a month. The next two weeks will be critical and the situation could could deteriorate quickly, driving up fuel costs and broader inflation if the conflict drags on, according to energy analyst Vibhuti Garg with the Institute for Energy Economics and Financial Analysis, or IEEFA, in Delhi.
“It is a very, very volatile situation,” Garg said.
The main risk is higher prices for perishable foods vulnerable to supply shocks. At the same time, a weaker rupee and higher borrowing costs could slow the economy, she said.
Japan, South Korea and Taiwan are most exposed
Few regions are as exposed to Middle East energy flow disruptions as East Asia.
Japan imported 2.34 million barrels of crude per day in January, about 95% of its total imports that month, according to its Ministry of Economy, Trade and Industry. Japan is often ranked as the world's second-largest LNG importer.
South Korea relies nearly entirely on energy imports. The Korea International Trade Association says it gets around 70% of its crude oil and 20% of its LNG from the Middle East.
Taiwan also imports nearly all of its LNG. It has been trying to reduce its reliance on the Middle East but still sources about one-third from Qatar, which halted LNG production after attacks on its facilities.
Japan and South Korea have large energy supply stockpiles. While Taiwan announced that it has enough supplies for March and contingency plans for the future.
But analysts say reserves are temporary buffers and energy-intensive industries, like Taiwan's semiconductor industry, remain vulnerable.
Governments are in “hope for the best, prepare for the worst” mode, said Grant Hauber, with IEEFA, warning some may regret not diversifying sooner into renewables, a "natural hedge" against disruption.
Fossil fuels dominate the energy mix in all three East Asian economies. Renewables provide under 10% of power in South Korea and Taiwan and about 22% in Japan, according to the International Energy Agency.
Southeast Asia
braces for energy issues
Developing, energy-hungry countries in Southeast Asia face the risk of being outbid by richer nations as supplies tighten.
In Singapore, officials have warned businesses and households to brace for higher energy bills.
In Manila, authorities banned non-essential travel and personal use of government cars to cut fuel use.
In Thailand, officials have urged the public to save energy, as motorists lined up at filling stations as prices climbed.
Full-time delivery riders and drivers — essential to keeping goods and people moving through Thailand’s congested urban centers — depend on fuel to earn a living. In the northern city of Chiang Rai, 64-year-old taxi driver Sommit Sutar said he can't see how to conserve fuel and still work.
“Gasoline was already expensive. This war will make the problem even worse,” Sutar said.
The government has suspended petroleum exports to shore up domestic reserves, which it says can last up to 61 days while ramping up natural gas production from the Gulf of Thailand and Myanmar.
Thailand relies heavily on spot-market LNG, leaving it “highly exposed to price and geopolitical volatility,” said Amy Kong, with the Brussels-registered research group Zero Carbon Analytics. That makes it vulnerable to bidding wars with wealthier nations.
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Ghosal reported from Hanoi, Vietnam. Associated Press business writer Chan Ho-him in Hong Kong contributed to this report.
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