[Asia Report] The Flames of Hormuz and ASEAN's Achilles' Heel

Gas-and-Run Incidents Surge at Gas Stations
Philippines Declares National Energy Emergency
Oil Producer Indonesia Holds Only 22 Days of Strategic Reserves
Energy Security Left to Market Forces Spurs Crisis

Recently, there has been a noticeable sense of lost confidence in ASEAN (Association of Southeast Asian Nations) countries. This is due to an accelerating oil crisis, or more broadly, energy insecurity. The idea of ASEAN being shaken by oil issues feels unusual. Southeast Asia has long been perceived as a region rich in resources, with countries like Indonesia once being members of the Organization of the Petroleum Exporting Countries (OPEC) and still maintaining close relationships with Middle Eastern oil producers.

However, the reality has proven to be far more vulnerable than expected. Countries such as the Philippines, Laos, and Myanmar are experiencing “energy bank runs,” with lines stretching hundreds of meters at gas stations due to neighboring countries' controls on oil exports. Even Thailand and Malaysia, which are relatively better off, are under so much pressure that both everyday life and industry are being shaken. This crisis has exposed the most vulnerable Achilles' heel of ASEAN, which until now had been dubbed “Asia's new growth engine.”

The most serious situation is unfolding in Manila, Philippines. Since May, the Philippine National Police have issued a special alert as “gas-and-run” incidents—where people fill up at gas stations and flee without paying—have surged nationwide. Major shopping malls in Manila and Cebu have considered shortening business hours to conserve electricity for air conditioning, while some airlines have reduced domestic flights due to the burden of securing jet fuel. Just a few months ago, the Philippines was celebrated as a “high-growth consumer market,” but it is now reeling from fuel shortages, power-saving measures, and growing concerns over public safety.

The Philippines Trapped in a Triple Crisis

The Philippines began to falter immediately after the Hormuz crisis began. On March 24, President Ferdinand Marcos Jr. declared a “national energy emergency” when the country's oil reserves fell below 45 days’ worth. Jeepney drivers, who serve as the main mode of public transport for ordinary citizens, could no longer afford fuel prices that soared past 100 pesos per liter, leading them to stop operations and take to the streets. Public institutions were forced to adopt a four-day workweek and mandatory remote work to save electricity.

The main reason the Philippines has suffered such a severe blow is due to a combination of three structural limitations. First, the country depends on the Middle East—namely Saudi Arabia and the United Arab Emirates (UAE)—for 98% of its crude oil imports. Second, as an archipelago nation composed of over 7,000 islands, if maritime supply lines are cut, energy supply to outlying islands collapses like dominoes, creating a geographical dilemma.

To make matters worse, the 1998 Oil Deregulation Law left oil imports and distribution entirely up to the private sector, causing gas station prices to be 100% linked to international oil prices. The government had no legal authority to control prices. The Hormuz Strait crisis directly hit ordinary citizens with skyrocketing oil prices. On top of this, the energy crisis caused the Philippine peso to plummet, and private power generation companies—forced to purchase oil and natural gas in U.S. dollars—faced a vertical surge in costs. The household electricity rate of the country’s largest power company, Meralco, soared to 14.35 pesos per kWh in April alone. Combined with the seasonal surge in demand due to heatwaves in April and May, ordinary citizens faced not only soaring fuel costs but also “electricity bill shock.”

Neighboring countries are not much better off. Oil-producing Indonesia is facing the worst oil crisis with only about 22 days’ worth of strategic reserves. Laos and Cambodia, lacking or barely having refineries to process crude oil, have experienced social paralysis as logistics trucks and ambulances come to a halt when neighboring countries like Thailand and Vietnam restrict oil exports to secure their own supplies. Myanmar’s problem is that, since the coup, its foreign reserves have dried up and it cannot pay for surging international oil prices in dollars. Vietnam’s situation is comparatively better, but it is only holding on through a nationwide mobilization system.

One by one, major Southeast Asian countries are helpless in the face of the Hormuz crisis, each for their own reasons. Governments have tried to calm public unrest by providing subsidies, but this has proven to be a bottomless pit. Instead, concerns have grown that this will only lead to fiscal stagflation, jeopardizing the country’s financial health.

A Different Scale: The South Korea and Japan Model

The panic in ASEAN stands in stark contrast to energy powerhouses South Korea and Japan in Northeast Asia. The 20–45 days of reserves held by Southeast Asian countries are not for national security, but rather “commercial inventories” held by refiners for distribution. If supply is cut off, reserves would run out in just a month. In reality, once a crisis hits, almost every economic actor hoards supplies, rendering these reserves effectively meaningless.

In contrast, South Korea stores over 200 million barrels of crude oil and petroleum products in massive underground rock caverns at nine sites across the country, including Ulsan, Geoje, and Yeosu. This is enough to keep the country’s industries and vehicles running as usual for over 200 days even if not a single drop of oil arrives from the Middle East. In March, South Korea demonstrated its excess capacity by releasing 22.46 million barrels of strategic reserves to the market as part of global cooperation. This single release by South Korea matched the entire national reserves of the Philippines. This robust defense was built after the near-paralysis of the country during the oil shocks of the 1970s, with astronomical sums invested to build a protective barrier. During this crisis, Japan—despite not being an oil producer—was able to play the role of “lifeline” for the Philippines by urgently supplying 142,000 barrels of diesel, thanks to this solid infrastructure.

It is not because Southeast Asian countries were unaware of this model. Building strategic reserve facilities costs trillions of won, and once oil is stored underground, the money is “locked in.” For developing countries with fiscal deficits and urgent infrastructure needs, energy security has always been relegated as a problem for the future. ASEAN should have expanded its oil reserve capacity and refining infrastructure, but, as in the past, failed to prepare adequately.

The Final Warning

As of the end of May, the Philippines has managed to ease the worst panic by urgently importing Russian crude oil for the first time in five years and securing alternative supply chains via Japan and Malaysia. However, this is only a temporary fix. Unless the geopolitical risks in the Strait of Hormuz are resolved, the threat remains very real.

This brutal experience could soon be compared to the Asian Financial Crisis of 1997. The Philippine Congress has rushed to propose the “National Strategic Petroleum Reserve System (PSPR) Bill.” President Marcos has strongly urged the establishment of a regional joint reserve network at the ASEAN Summit, declaring that “the absence of bloc-level energy cooperation is a luxury we can no longer afford.” There are even signs of pragmatic change, such as putting the joint development of oil fields in the South China Sea back on the table with China, despite ongoing territorial disputes.

ASEAN is now united in the belief that the era of leaving energy security solely to market forces, using fiscal burden as an excuse, must end. While they speak of benchmarking South Korea and Japan by building decentralized national reserve facilities and accelerating the transition away from fossil fuels, it remains uncertain whether they have the resources to do so.

The Hormuz shock is the final warning for ASEAN. If this lesson is not learned thoroughly, Southeast Asia’s economic miracle could vanish like a mirage when the next geopolitical storm hits.

Jung Hojae, Secretary-General of the Asia Vision Forum

This content was produced with the assistance of AI translation services.