Asia Fuel Crisis: Rationing, Coal Reliance as Iran-Israel War Disrupts Supplies

Energy Shockwaves: Asia Grapples with Rising Fuel Prices Amid Hormuz Tensions

A widening energy shock, triggered by escalating tensions in West Asia and disruptions to shipping through the Strait of Hormuz, is forcing governments across Asia to implement emergency measures. From school closures and curtailed workweeks to fuel rationing and a renewed reliance on coal, the impact is being felt across multiple sectors and daily life. The crisis underscores the region’s vulnerability to disruptions in global oil and gas supplies, and is prompting a scramble for alternative energy sources and conservation strategies. Pakistan, China, Sri Lanka, and several other nations are already experiencing significant price increases and supply constraints, raising concerns about economic stability and potential social unrest.

The Strait of Hormuz, a narrow waterway connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea, is a critical chokepoint for global energy flows. Approximately 20% of the world’s oil supply passes through this strait daily, making it a focal point for geopolitical risk. Recent events have squeezed Liquefied Natural Gas (LNG) supplies, pushing countries to increase their reliance on coal – a move that, while providing a short-term fix, risks hindering progress towards cleaner energy transitions and exacerbating air pollution.

Coal’s Resurgence and the Clean Energy Dilemma

India is increasing its coal burn to meet peak summer demand, while South Korea has temporarily relaxed limits on coal-based power generation. China, already the world’s largest consumer and producer of coal, continues to ramp up its coal capacity to bolster energy security, despite its commitments to expanding clean energy sources. Indonesia is prioritizing domestic coal use over exports, further tightening regional availability. Thailand, the Philippines, and Vietnam are also leaning more heavily on coal-fired power plants to manage shortages. This shift, while pragmatic in the face of immediate energy needs, presents a setback for long-term environmental goals.

Pakistan’s Response: Austerity Measures and Fuel Restrictions

Pakistan is among the most acutely affected nations, implementing a series of drastic measures to conserve fuel. Schools and colleges have been shut down for two weeks, a four-day working week with 50% work from home has been mandated for government staff, and fuel allocations to departments have been halved, with non-essential vehicles taken off the roads. These measures reflect the severity of the economic strain and the government’s limited capacity to absorb rising import costs. The country recently imposed a 200% hike on high-octane fuel, demonstrating the escalating financial pressure. Gulf International Forum reports on the broader implications of Hormuz disruptions for Asia’s energy resilience.

Sri Lanka and Bangladesh: Rationing and Blackouts

Sri Lanka has reintroduced a QR-based National Fuel Pass system, imposing strict weekly caps on fuel consumption. Prices have also been raised by approximately 25% in recent weeks. Bangladesh is grappling with long queues and unrest at fuel stations, with pump owners warning of a “critical point” as supply struggles to meet demand. Universities, foreign curriculum schools, and coaching centers have moved online, and fuel rationing has been in place since March 8th. The country is also experiencing five-hour rolling blackouts and a shutdown of most fertilizer plants due to gas shortages. MSN details the risks to fertilizer supply stemming from the Hormuz situation.

Regional Responses and Conservation Efforts

Beyond Pakistan, Sri Lanka, and Bangladesh, several other countries in the region are implementing conservation measures. Bhutan has banned fuel sales in jerry cans to prevent hoarding and activated work-from-home policies, prioritizing fuel supply for emergency services. The Philippines has mandated a four-day work week for government staff and is urging the private sector to adopt remote work arrangements, while also banning non-essential official travel. Vietnam is encouraging businesses to adopt work-from-home policies and promoting public transport, cycling, and carpooling. Myanmar has implemented an odd-even vehicle scheme to reduce fuel consumption. Cambodia has seen approximately one-third of its petrol stations shut down by mid-March, and Laos has implemented remote work for civil servants and rotational shifts to reduce commuting.

Beyond Asia: A Global Energy Squeeze

The energy squeeze is not limited to Asia. South Africa has adopted “controlled allocation measures” in response to diesel shortages in several provinces. Egypt has implemented early closures for malls, restaurants, and government offices, and has switched off illuminated billboards. Kenya has enforced fuel rationing and effectively halted exports. Even New Zealand is feeling the impact, with Air New Zealand cancelling over 1,000 flights due to rising jet fuel costs, and the government considering reviving a ‘car-less day’ policy. Slovakia and Slovenia have imposed fuel quotas and rationing limits to maintain supply. Business Standard reports on the impact of the conflict on global LNG exports, which have hit a six-month low.

The Fragile Balance and Future Outlook

Even with some shipments continuing to navigate disrupted routes, supplies are being diverted to critical sectors like fertilizers, potentially impacting agricultural production. The reliance on coal, while providing a short-term solution, could deepen long-term vulnerabilities and hinder efforts to combat climate change. The current crisis highlights Asia’s continued dependence on imported energy and the speed with which disruptions can ripple through economies and everyday life.

Looking ahead, the situation remains fluid. The immediate priority for governments will be to manage supply constraints and mitigate the economic impact on citizens and businesses. Diplomatic efforts to de-escalate tensions in West Asia are crucial to restoring stability to the region and ensuring the free flow of energy supplies. Longer-term, the crisis underscores the require for greater investment in renewable energy sources and energy efficiency measures to reduce dependence on fossil fuels and enhance energy security. The development of diversified energy supply chains and strategic reserves will also be essential to building resilience against future disruptions.