Asia Revives COVID-Era Measures to Combat Fuel Crisis Triggered by Iran War

As global fuel prices surge due to disruptions stemming from the conflict in Iran, several Asian nations are revisiting strategies employed during the COVID-19 pandemic to mitigate the economic and social impacts. These measures include promoting remote work, reducing workweeks, and implementing public campaigns to conserve energy.

The Strait of Hormuz and Asia’s Energy Vulnerability

The current crisis is largely attributed to disruptions at the Strait of Hormuz, a critical waterway for global energy supply. Asia is particularly vulnerable, importing over 80% of the crude oil that transits through the strait, which has been significantly impacted since the start of the conflict on February 28th [Reuters]. This disruption has led to fuel shortages and soaring prices across the region.

Reactivating COVID-19 Era Policies

Governments are now considering policies reminiscent of those used during the pandemic to balance supply and demand volatility. While widespread mandatory work-from-home directives haven’t been implemented, policymakers are actively developing contingency plans [IBTimes].

South Korea Leads the Way

South Korea has emerged as a frontrunner in exploring remote work as a fuel-saving measure. Energy Minister Kim Sung-whan indicated the government is considering the recommendation from the International Energy Agency (IEA) to encourage working from home [IBTimes].

Broader Regional Responses

Several other nations are implementing various measures:

• Philippines: President Ferdinand Marcos has declared a national energy emergency and some administrations have reduced workweeks.
• Pakistan: Schools have been closed for two weeks, and office workers are encouraged to work from home.
• Sri Lanka: A weekly public holiday has been introduced to conserve fuel.
• Thailand: Prime Minister Anutin Charnvirakul has asked civil servants to suspend foreign travel, maintain air conditioning temperatures above 25°C, avoid formal attire, use stairs, and telework.

Economic Incentives and Subsidies

Beyond behavioral changes, governments are also deploying economic tools to alleviate the burden on citizens.

Japan’s Fuel Subsidies

Japan plans to mobilize 800 billion yen ($5 billion USD) in reserve funds to subsidize fuel costs, aiming to preserve gasoline prices around 170 yen per liter [Reuters].

Novel Zealand’s Financial Support

New Zealand will provide temporary financial support of 50 New Zealand dollars per week to low-income families starting in April [Reuters].

Australia Addresses Price Speculation

Australia is addressing fuel shortages, particularly in remote areas, and has proposed doubling sanctions against price speculation.

Central Bank Dilemmas and Inflation Risks

Unlike the COVID-19 pandemic, which prompted accommodative monetary policies, central banks are now grappling with the risk of rising inflation. The Reserve Bank of Australia has already increased interest rates twice this year, citing energy risks as a key factor [Reuters]. Economists note that central banks face a difficult choice between controlling inflation and supporting economic growth.

Looking Ahead

The fuel crisis triggered by the Iran conflict presents a significant challenge for Asian economies. The revival of COVID-era strategies demonstrates a willingness to adapt and prioritize energy conservation. However, the long-term effectiveness of these measures will depend on the duration of the conflict and the ability of central banks to navigate the complex interplay between inflation and economic growth.