The consequences of surging oil prices are manifesting across the globe through various forms of demand destruction, with Asia bearing the brunt of the energy crisis stemming from the Iran conflict. Recent analysis from financial institutions demonstrates how disruptions spread from Asia to Africa, Europe, and eventually reach the United States.
In Australia, the government has implemented a three-month reduction of fuel excise duties starting Wednesday, cutting approximately 26 Australian cents per liter from petrol and diesel costs. This decision follows record-breaking prices, with diesel exceeding A$2.82 per liter and petrol approaching A$2.40. Prime Minister Anthony Albanese announced these measures would cost roughly A$2.55 billion and reduce consumer price inflation by half a percentage point. Despite government assurances that fuel supplies remain secure, reports indicate panic purchasing has caused stations to run dry, with one in seven retailers in New South Wales lacking at least one fuel type. Diesel prices in Sydney reached historic highs of 314.5 cents per liter, prompting consumers to hoard fuel in jerry cans.
Japan’s Trade Minister Ryosei Akazawa confirmed the country would sell oil from strategic reserves to domestic refiners rather than directly assisting other Asian nations requesting support. The Philippines and Vietnam have approached Japan for aid amid their own supply
challenges. Additionally, Japan’s industry ministry announced plans to relax regulations on coal-fired power plant usage for one year beginning April, suspending the 50 percent capacity utilization cap for less efficient facilities. This emergency measure aims to reduce LNG consumption by approximately 500,000 tons annually.
India has introduced a 21.5 rupee per liter export duty on diesel and 29.5 rupees on jet fuel while simultaneously reducing domestic taxes by 10 rupees per liter on both gasoline and diesel. Finance Minister Nirmala Sitharaman stated these actions ensure adequate domestic availability. The country faces acute shortages of liquefied petroleum gas and liquefied natural gas, leading to panic buying and long queues at fuel stations. Economists estimate the government’s annualized revenue loss from tax cuts at approximately 1.55 trillion rupees.
Thailand has strengthened oversight of fuel pricing and supply, requiring refineries to display selling prices and current inventory levels at their facilities. Diesel demand has surged to 87 million liters daily from a pre-conflict average of 67 million liters. The government continues subsidizing diesel at 19 baht per liter, pushing the oil subsidy fund deficit to about 38 billion baht.
Vietnam’s aviation sector faces severe disruption, with Vietnam Airlines suspending seven domestic routes from April and potentially cutting up to 18 percent of international flights and 26 percent of domestic routes. Vietjet Air plans an 18 percent capacity reduction in April, while Bamboo Airways passengers face the most significant impact with flights halved to 15-17 daily operations. The government has temporarily frozen certain taxes on gasoline, oil and jet fuel until mid-April.
Across Southeast Asia, governments have implemented price caps and subsidy programs, with costs recovered through various compensation mechanisms. Indonesia’s Pertamina, along with Japanese and Malaysian refiners, receive government compensation for losses. China maintains a $130 per barrel crude price cap on refined product pass-through costs while introducing new subsidies on diesel and gasoline.
In Africa, Kenya plans to utilize its petroleum development levy to stabilize pump prices, though Treasury Secretary John Mbadi warned extended conflict could create emergencies. Independent operators report rural stations are severely affected, with competitive pricing becoming impossible for non-franchised outlets representing 68 percent of Kenya’s 6,200 gas stations.
European nations are responding similarly. The Czech government considers regulating retail margins at gas stations, while Poland announced plans to reduce value-added and excise taxes on fuels and impose daily price caps based on wholesale levels. These measures could reduce fuel costs by 1.2 zloty per liter and include windfall taxes on refiners.