Asia scrambles to adjust as alarm grows over oil turmoil

Across Asia, where countries are highly exposed to rising oil and gas costs and tightening supply, governments are acting to mitigate economic harm, write Aaron Krolik, Choe Sang-Hun and Sui-Lee Wee from Seoul and Bangkok

- 

Oil prices surged well above $110 a barrel on Monday, its highest level since the Covid-19 pandemic, reflecting global fears of a prolonged Middle East conflict.

(REUTERS)

The emerging shock of climbing oil prices rumbled through Asia, where countries, rich and poor, tried to contain the economic fallout from the escalating war in the Middle East.

South Korea announced on Monday it would cap prices at the pump for the first time in nearly 30 years. In India, the city of Pune has temporarily suspended gas-based cremations, asking customers to use wood or electricity instead. Pakistan said it would increase petrol prices by about 20% to throttle demand from regular drivers and allow diesel costs to remain low for trucks and buses.

As the price of crude oil soared above $100 (about 3,200 baht) a barrel, governments are being forced to take increasingly extreme measures to protect consumers from punishing price increases and to constrain energy use to prevent shortages in a conflict with no end in sight. Few parts of the world are as acutely exposed as Asia to the curtailment of oil and gas from the Middle East, which accounts for a majority of the region's energy imports.

The Strait of Hormuz is a narrow passage between Iran and Oman that separates the world's biggest oil and natural gas producers from their customers. Historically, roughly 20 million barrels pass through it each day, most of it bound for Asia. The strait has been effectively closed to seaborne traffic because of the conflict, leaving governments scrambling for solutions to keep fuel flowing and prices from spiralling out of control.

"There's no replacement for that," said Edward C. Chow, a former executive at Chevron who led international external affairs and managed operations in China. "The market sees a physical supply shortage."