Asia faces fuel shortages due to Middle East conflict and China’s export bans

Amidst rising fuel shortages spurred by Middle Eastern conflict, Asian nations are intensifying efforts to secure energy supplies, with bartering agreements gaining traction. Indonesia’s leader recently visited Tokyo, highlighting this trend.

China’s fuel export bans have intensified the search for alternatives. South Korea and Thailand are looking to leverage the temporary easing of U.S. sanctions on Russian energy as a stopgap measure.

The situation is particularly dire for less affluent nations. The Philippines declared a national energy emergency, Sri Lanka shortened its workweek, and Myanmar implemented driving restrictions.

Indonesia, the largest Southeast Asian economy, has also implemented measures such as fuel sales limits and work-from-home directives. President Prabowo Subianto emphasized the importance of maintaining economic relationships during his Tokyo visit, following the signing of deals for long-term oil, gas, and geothermal power projects. He also noted the strategic uncertainty caused by the Middle East’s geopolitical situation.

Jakarta and Tokyo are considering a swap deal where Indonesia would supply liquefied natural gas in exchange for liquefied petroleum gas, a cooking fuel, according to Djoko Siswanto of SKK Migas. While both leaders discussed energy security during their meeting, they did not confirm any specific swap agreements.

Meanwhile, Japan’s Inpex is exploring a similar barter deal with India. Vietnam is also seeking Japan’s assistance. The Philippines has received diesel from Tokyo. Japan’s trade minister stressed the importance of ensuring fuel supplies to Southeast Asia but refrained from commenting on specific deals. Japan, reliant on the Middle East for most of its oil and LNG imports, possesses substantial energy reserves.

China’s export ban has impacted jet fuel supplies. Australia is engaging with key suppliers, including China, but faces constraints due to the ban. Vietnam, heavily reliant on Chinese jet fuel, is seeking alternative suppliers, including Brunei, India, Japan, and South Korea.

Hiroshi Hashimoto of Japan’s Institute of Energy Economics suggests that while bilateral deals can alleviate shortages, a protracted crisis necessitates broader cooperation among Asian countries and exploring diverse supply sources.

Russia emerges as a potential, albeit unexpected, supplier. South Korea imported Russian naphtha this week, while India has increased its oil purchases from Russia. Negotiations are also underway with Bangladesh, Thailand, and Sri Lanka. However, finalizing deals with Russian companies before the U.S. sanctions waiver expires on April 11 could pose challenges.

Other nations, like New Zealand, are concerned about their vulnerability in the intensifying fuel search. Prime Minister Christopher Luxon has engaged with leaders from Singapore, Malaysia, and South Korea, New Zealand’s main suppliers.