Hoarding oil surges and prices skyrocket, causing a tight fuel supply in Asia.
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The conflict between the US and Iran has cut off the energy route through the Strait of Hormuz. Suppliers across Asia, from marine fuel to liquefied petroleum gas, are slashing shipments, as a regional energy crisis spreads rapidly.
The global oil transport artery, the Strait of Hormuz, has almost come to a standstill. According to Bloomberg, the impact is formidable—even markets with ample reserves are not immune. Singapore, the world's largest marine fuel port, has notified clients that only part of previously signed contracts can be fulfilled, citing a sharp reduction in its own incoming supplies.
On the pricing front, the scramble for supplies has pushed varieties such as jet fuel and marine diesel sharply higher. Platts, S&P Global's physical oil pricing agency, recently adjusted its pricing methodology, further highlighting the severity of the current price spike. Asian importing countries and end consumers are under increasing pressure.
Governments are striving to address the situation: Japanese refiners are applying to authorities to tap strategic oil reserves; South Korea has issued a Level-1 energy alert and will cracking down on price gouging and other activities; India is urgently negotiating with producing countries over LPG imports; Bangladesh has begun reducing fuel supplies to gas stations.
Singapore in Emergency: Marine Fuel Orders Cut
The Strait of Hormuz is one of the world’s most important energy transportation routes, with oil and gas passing through daily making up a significant share of global trade. The near shutdown of the route has directly affected the supply chains of crude oil and refined products to Asian refineries and end users.
As the world’s largest ship-bunkering port, Singapore’s actions are a bellwether for the international shipping industry. According to Bloomberg, local marine fuel suppliers have notified clients that only part of previously agreed volumes can be delivered, citing a sharp reduction in deliveries from upstream suppliers.
South Korea Issues Level-1 Energy Alert, Cracks Down on Price Manipulation
On March 5, South Korea’s Ministry of Trade, Industry and Energy issued a Level-1 alert and warned of a crackdown on oil price manipulation and other market disruptions. Level-1 alert is the lowest level of South Korea’s four-level national resource security warning system.
According to Xinhua, citing Yonhap, the ministry said South Korea’s short-term energy supply capacity remains sufficient. The alert is a preventative measure against potential energy crises, aimed at minimizing the impact on public livelihood and corporate production.
South Korea's petrochemical sector has already been affected. South Korean petrochemical producer Yeochun NCC announced it will invoke force majeure clauses in some sales contracts, as naphtha feedstock shipments are obstructed.
Naphtha is a key feedstock for producing ethylene and other basic chemicals, mainly sourced from the Middle East. If the disruption persists, it may cause a cascading impact on downstream chemical supply.
Japan Applies to Release Strategic Reserve, India Urgently Seeks Import Sources
Japan, which is highly dependent on crude oil imports, is in a particularly vulnerable position, with about 90% of its crude supply coming from the Middle East. Japanese refiners have applied to the government to release the national strategic oil reserve to cover shortages.
Liquefied petroleum gas (LPG) is the main cooking fuel for many Asian households, with the Middle East as one of the most important supply sources.
India, one of the markets most affected, is currently actively negotiating with producing countries, but alternatives from the US are too far away for timely replacement, leaving very few viable options. According to Bloomberg, some countries may ultimately have to implement some form of rationing.
Price Surge: Bangladesh Moves to Limit Supply First
Faced with sharply rising fuel prices, Bangladesh has taken the lead in responding. The country is preparing to cut the volume of refined fuel supplied to gas stations and is urging the public to reduce unnecessary private vehicle use to curb demand. These actions reflect the impact of soaring energy prices on developing Asian economies.
Prices of jet fuel and marine diesel have surged especially high. Platts' recent adjustment of physical oil pricing methodology further amplifies price signals technically, making market assessments of supply-demand imbalance more pessimistic.
The situation is still evolving. The focus is on when the Strait of Hormuz will return to normal operations, and whether governments can balance the use of strategic reserves with demand controls.
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