Asia looks to COVID-era playbook to tackle fuel crisis

Countries across Asia are weighing up work-from-home policies and stimulus measures enforced during the COVID-19 pandemic, as they scramble to respond to global fuel shortages triggered by the Iran war.

Asia is at the frontline of the fuel crisis, buying more than 80% of the crude that transits the Strait of Hormuz, which has been almost totally blocked by Iran since the war broke out on February 28.

No country in the region has enforced work-from-home measures yet, but some have said they are on the table.

“I think it is a good idea,” South Korean Energy Minister Kim Sung-whan said on Tuesday, March 24, when asked about an International Energy Agency recommendation for people to work from home.

The IEA, which agreed a record release of around 400 million barrels of oil from strategic stockpiles to deal with the crisis, has outlined proposals to ease oil price pressures, such as working from home and avoiding air travel.

IEA Executive Director Fatih Birol repeated those calls at a conference in Sydney this week.

“There were real-life tests, such as after the Russian invasion of Ukraine, European countries adopted these measures, and it was announced by the European governments. It helped them a lot to go through these difficult times without Russian energy … but keeping the lights on,” Birol said.

Industrial powerhouse South Korea on Tuesday launched a public campaign asking people to cut shower time, charge phones during the day, and run vacuums on weekends.

“We will consult with relevant ministries and actively consider measures for work-from-home,” Energy Minister Kim told a briefing.

The Philippines, which relies heavily on Middle Eastern oil for its energy needs, shortened the work week in some government offices earlier this month. President Ferdinand Marcos declared a state of national energy emergency, saying the conflict poses an “imminent danger” to the country’s energy supply.

Pakistan closed schools for two weeks and said office workers would work more from home. The island nation of Sri Lanka declared a public holiday every Wednesday, March 25, to help make its fuel supplies go further.

Singapore, an Asian financial hub, urged people and businesses to switch to energy-efficient appliances, use electric vehicles, and set the temperature higher on their air conditioners.

Thai Prime Minister Anutin Charnvirakul ordered bureaucrats to suspend overseas trips, set air conditioning temperatures above 25 degrees Celsius (77 degrees Fahrenheit), avoid suits and ties, use stairs instead of elevators, and work from home.

Cost-of-living relief

Some countries have turned to stimulus measures as rising fuel costs bite into household budgets.

The Japanese government said on Tuesday it plans to tap 800 billion yen ($5 billion) in reserve funds to finance subsidies aimed at keeping gasoline prices at about 170 yen per litre on average. The measure would cost as much as 300 billion yen per month.

New Zealand said on Tuesday that it would provide temporary financial support of NZ$50 ($29.30) every week from April for low-income families.

“We know these families will be hit particularly hard by the global fuel-price shock. We are delivering them timely relief,” New Zealand Finance Minister Nicola Willis said.

In neighboring Australia, hundreds of petrol stations are running dry from panic buying and shortages, which are acutely hitting the remote regional areas of the vast continent.

The center-left government introduced legislation in the parliament to double penalties for fuel price gouging.

Several Asian countries have also released petrol and diesel from domestic reserves and temporarily loosened gasoline and diesel quality standards to increase supply.

Policy dilemma

The glaring contrast with the pandemic, however, is that central banks are not rushing to cut interest rates. In fact, they are considering hikes.

During the pandemic, demand collapsed as many economies were essentially shuttered for health reasons, so policymakers responded with massive stimulus.

Now, the Reserve Bank of Australia has already hiked rates twice this year. It cited energy risks as a material risk to inflation and a reason for raising rates to a 10-month high last week.

Investors expect Japan, Britain, and Europe will all raise rates in the coming months, and pressure on Asian economies may be even more acute as their currencies slip against the dollar.

“Central banks face a classic policy dilemma when oil prices surge – inflation rises, but growth might weaken,” Jennifer McKeown, chief global economist at Capital Economics, said in a note last week.

“The right response depends crucially on why oil prices are rising, how persistent the shock is, and whether inflation expectations are at risk,” she added. – Rappler.com