When fuel gets scarce, ordinary people feel it first. Across Asia this year, governments told civil servants to work from home, set price caps on fuel and rationed driving days. The cause was a war that started six months ago, when the United States and Israel went to war with Iran, and the near closure of the Strait of Hormuz that followed. Al Jazeera reports that Iranian attacks and a US naval blockade have cut shipping through the strait to a trickle.
Now the region is looking for something sturdier than emergency rules. Parul Bakshi, a visiting research fellow at the Oxford Institute for Energy Studies, describes two kinds of investment: infrastructure that bypasses geopolitical risk, and infrastructure that removes exposure to imported fuel altogether. “It is no longer enough to ask where the next barrel comes from,” she said.
Thin cushions in Southeast Asia
The reserve figures at the war’s outbreak in late February were uncomfortable. Vietnam held enough oil in its national reserves for only five to seven days, although commercial inventories and other sources stretched supplies by up to 65 days. Thailand had about 61 days across the public and private sectors, against a 25-day mandated minimum. The Philippines was estimated to hold 50-60 days in private commercial inventories. All of that sat below the International Energy Agency’s 90-day benchmark. Philippine President Ferdinand Marcos Jr. declared a state of energy emergency on March 24, according to a Nippon.com analysis from Japan’s JIIA think tank.
Japan, which weathered the shock better because it holds one of the world’s largest strategic oil reserves, stepped in. At an online summit on April 15 with leaders and representatives from 16 Asian countries, Prime Minister Sanae Takaichi launched POWERR Asia, backed by an envisioned $10 billion support package. It funds emergency purchases of alternative crude and petroleum products, and, over the longer term, support for stockpiling systems and storage tanks.
Manila and Bangkok are moving. Last month a Philippine parliamentary panel approved a bill to create a 60-day government-held reserve. Thai officials are advancing plans for cross-peninsula crude pipelines and tank farms that would put Thailand up against Singapore as a place to store Gulf crude, said Ben Kiatkwankul of Maverick Consulting Group.
India, Korea and the Gulf suppliers
India had about 74 days of oil stocks as of May, according to S&P Global, with more than 90 percent held by state-owned firms. In July the Oil and Natural Gas Corporation said it would build a reserve of 1.75 million metric tonnes, or 13 million barrels, in the south. New Delhi is also weighing a proposal to keep some strategic reserves at the UAE port of Fujairah, outside the Hormuz bottleneck, and ADNOC aims to raise its crude storage capacity in India to 30 million barrels.
South Korean media report that Seoul is considering adding 30-40 million barrels to its reserves of some 146 million barrels, up from an earlier plan for 20 million. Clara Gillispie, a senior fellow at the Council on Foreign Relations, noted that Japan, South Korea and Singapore already have long-standing storage partnerships with Middle Eastern countries and have signalled interest in expanding them.
China is building too. Its latest five-year plan, covering 2026 to 2030, includes more pipelines and bigger LNG storage. PipeChina said in May that it was speeding up work on nearly 40 oil and gas projects, among them 9,000 kilometres of domestic pipeline. Those plans predate the war, said David Fishman of the Lantau Group, but the crisis has made them look right. Any doubt over the cost of building possibly surplus reserves, he said, “will certainly have evaporated.”
Sources
- Asia looks to store oil, gas closer to home after Strait of Hormuz crisis – Al Jazeera
- Japan's Bold Moves for Energy Resilience in Asia: POWERR Asia and AZEC 2.0 – Nippon.com (JIIA)
