Money Can't Buy Gas, Phuket Cruise Ships Come to Halt: Middle East Conflict Rages, Southeast Asia Squeezed Against the Wall by Oil Prices Exceeding $100 per Barrel

Financial Daily Reporter | Wang Jiaqi Financial Daily Editor | Lansou Ying

Following the “blockade” of the world’s energy artery, the Strait of Hormuz, this week both sides of the US, Israel, and Iran conflict began attacking energy facilities.

On March 18, Israel launched an airstrike on Iran’s South Pars gas field, the world’s largest natural gas field. On March 19, Iran announced strikes on oil facilities in multiple Gulf countries, with the conflict spreading to Saudi Arabia, the UAE, and Qatar, entering a new phase of war.

Since March 12, Brent crude futures have not fallen below $100 per barrel, rising over 40% since the beginning of March.

Brent crude futures price trend since late February

The soaring oil prices are impacting every corner of the globe. In Southeast Asia, heavily dependent on Middle Eastern energy, there are signs of fuel shortages, stagnating tourism, and even protests.

Although governments have subsidized to stabilize refined oil prices and urged officials to reduce travel, locals are well aware that these measures are only delaying the inevitable. Governments cannot keep “burning” money forever; if the war continues, price hikes are unavoidable.

“Even with money, you might not get fuel,” is the most direct feeling among Thai people right now.

After the Middle East conflict erupted, the Thai government quickly issued signals of stability, stating that the country’s energy reserves could support over 60 days, and swiftly used the “Oil Fuel Fund” to subsidize diesel prices, keeping them below 30 baht per liter (about 6.3 RMB), while requiring oil companies to freeze prices in the short term.

Against the backdrop of international oil prices rising over 40%, this policy once made the Thai market appear “calm.”

Freight forwarder Sun Xiaojiu, based in Thailand, told the Daily Economic News (hereinafter referred to as “the Daily”) that “international oil prices are rising, but we hardly feel it because the government is covering the costs for everyone.”

Refined oil prices in Thailand have already begun to rise (photo source: interviewee provided)

More than prices, the difficulty of refueling has changed first.

In Bangkok, most gas stations remain open, but some have started limiting the amount of fuel per purchase, requiring people to visit multiple stations to fill up; in northern and northeastern Thailand, queues, fuel hoarding, and panic buying have appeared.

“Some stations don’t actually lack fuel; they are ‘holding back’ sales,” Sun said. Under subsidy pressures, some stations choose to delay sales, waiting for future price increases to sell.

Concerns about fuel shortages have also triggered chain reactions in the logistics industry. The fleet contracted by Sun’s company has seen prices generally increase by about 20%, with the more significant issue being increased uncertainty. “A few days ago, a shipment was ready to go, but the driver suddenly said he couldn’t make it, so the departure was delayed by half a day.” Such delays are becoming more frequent.

Moreover, “even with money, you might not get fuel,” he lamented. Some truck drivers and transport companies have to buy fuel at nearly 40 baht per liter, far above the station prices. Some fleets have even refused new orders due to tight fuel supplies.

Gas station in Bangkok showing “Fuel being transported” (photo source: interviewee provided)

The government has begun adjusting from the demand side. Since early March, some civil servants and state enterprise employees have been asked to work from home, reduce travel, and control air conditioning and electricity use. “It’s a bit like during the pandemic,” Sun said, “not yet mandatory power cuts or restrictions, but tightening is already underway.”

Thai officials and chambers of commerce have repeatedly warned that if oil prices continue to rise, costs will cascade through transportation, production, and logistics, ultimately reflected in food and daily necessities prices. Currently, because oil prices are still suppressed, ordinary consumers haven’t felt obvious inflation, but there’s a consensus that if the war lasts 1 to 3 months, price increases are inevitable.

Energy issues are quietly changing daily life. Commuting in Bangkok heavily relies on private cars and motorcycles, and queues for refueling and limited supplies have caused many complaints. Anxiety is spreading, though it hasn’t yet spiraled out of control.

Sun has also changed his travel methods, increasingly using his electric vehicle at home. He believes this conflict may inadvertently accelerate the adoption of new energy vehicles.

The Middle East crisis has also impacted Thailand’s key industry—tourism. In the first week of March, the number of inbound tourists decreased by about 9% year-on-year, with hotel occupancy rates at major tourist spots dropping to 10%.

With Songkran Festival approaching in April, Thailand was expected to enter a peak tourist season.

However, Mr. Xu (pseudonym), who runs a diving shop in Phuket, told the Daily that many diving boats have already stopped operations in advance. He said this is not an isolated phenomenon; operating costs for boats in Southeast Asia and even Australia’s Great Barrier Reef have risen in tandem.

In Phuket, diesel has become a key controlled item, with limited refueling to ensure basic social operations and local residents’ needs. Small vehicles are limited to about 400 baht (roughly 85 RMB) per refuel, large vehicles to about 1,000 baht.

This measure has limited impact on private cars—“locals just make a few extra trips to the station”—but for tourism-related maritime transport, diesel dependence is more direct. Xu said that all diving and sea tour boats in Phuket run on diesel, and some stations have even experienced diesel shortages for the first time since he settled in Phuket in 2022.

Many diving shops in Phuket rely on leasing large passenger ships. These ships can carry hundreds of passengers and consume a lot of diesel per trip. If supplies are limited, it not only affects operating costs but could also lead to fewer trips or even halts.

“Now, people are most worried about supply cuts, not price increases,” he said.

As of March 18, the 15-day diesel price cap at 29.94 baht per liter expired, and the Thai government announced a price increase but aimed to keep it within 33 baht per liter (about 6.94 RMB).

On the evening of March 19, Sun visited several gas stations in Bangkok. The results were not optimistic: some stations had run out of diesel, others said fuel was still in transit. “Bangkok is like this, and the provinces will only be worse.” The common 91-octane gasoline price has risen from just over 30 baht to around 31 baht. The increase is small but signals concern.

Gas stations in Bangkok displaying “No Diesel” signs (photo source: interviewee provided)

The Thai government still emphasizes “no energy crisis,” stating reserves can support 60 to 95 days, and over 1 billion baht (about 210 million RMB) daily is injected into the “Fuel Fund” to stabilize prices.

However, in reality, demand in some areas has surged 2-3 times in the short term, supply cannot keep up, and regional shortages have begun to appear. “Some small stations, due to rising procurement costs to 38-39 baht per liter (about 8-8.2 RMB), can’t sell at market prices and have to shut down,” Sun told the Daily.

The “Fuel Fund” that maintains refined oil prices is also under increasing pressure.

As of March 18, Thailand’s “Fuel Fund” deficit exceeded 12 billion baht (about 2.54 billion RMB), and the government has set a spending cap of 40 billion baht (about 8.46 billion RMB).

Market estimates suggest that such heavy subsidies can only be sustained for one or two months at most.

“People don’t really believe the ‘Fuel Fund’ can hold out,” Sun said. “Once it can’t, prices might not just rise slowly—they could jump suddenly.”

“These measures are really just delaying time,” he added.

Thailand is not the most dependent on Middle Eastern crude oil, but it is the largest oil and natural gas trade deficit economy in Asia. By 2025, Thailand’s net energy imports will account for about 5.5% of GDP, even higher than South Korea’s roughly 4%. The country’s total oil imports are about $29 billion annually, with over $17 billion coming from the Middle East—about 58% of its oil imports.

Thailand has temporarily suppressed oil prices through government subsidies, but in other parts of Southeast Asia, soaring prices have already caused social issues.

The Philippines relies on Gulf region supplies for 95% of its oil needs. As of March 19, diesel prices in the Philippines have more than doubled, with jeepney drivers protesting nationwide. Public transport operators driving jeepneys are among the most grassroots transportation workers in Philippine cities and rural areas.

A jeepney driver, Prado, told the media that all his earnings go toward paying for diesel. Previously, a three-trip fare could earn at least 1,000 pesos, but now only about 200 pesos.

The Philippine government has implemented a four-day workweek for some agencies and provided fuel subsidies. President Marcos also ordered a 10-20% reduction in electricity and fuel consumption, and a suspension of unnecessary travel and activities.

The budget department has allocated 3 billion pesos (about 350 million RMB) for fuel subsidies and discounts, but the leader of the nationwide strike-organizing transport group said these measures are far from enough.

On March 17, the Philippine Senate granted President Marcos emergency powers to temporarily suspend or reduce oil consumption taxes.

In Southeast Asia, Vietnam’s dependence on Middle Eastern oil is second only to the Philippines. Although the government used the “Fuel Price Stabilization Fund” to regulate refined oil prices for five days from March 10 to 14, it still couldn’t hold prices as firmly as Thailand. By March 16, gasoline and diesel prices had increased by 31.8% and 45.9%, respectively, compared to February 23.

Some gas stations in Hanoi have reduced their fuel dispensing points. At one station, only one of six pumps was operational. People queued in the rain, waiting to refuel motorcycles and cars.

On March 10, the Vietnamese government stated that the country is highly dependent on Middle Eastern energy imports and is among the most severely impacted by the turmoil. The government called on enterprises to “implement remote work and reduce travel and transportation needs.”

In response to high fuel prices, Vietnam is accelerating the adoption of ethanol gasoline.

According to a government directive signed by Prime Minister Pham Minh Chinh on March 19, the country will start using E10 gasoline (containing 10% bioethanol) from April, ahead of the original June 1 target.

As Southeast Asia’s largest economy, Indonesia has not experienced long queues at gas stations, mainly thanks to its residual confidence as a former oil exporter.

Indonesia was a member of OPEC but became a net oil importer as early as 2003. Currently, domestic crude oil production covers only about 40-50% of consumption, with 18% imported from the Middle East. Although dependence is not high, local prices are highly sensitive to oil prices, second only to Malaysia and Thailand in Asia. Morgan Stanley reports that every $10 increase in international oil prices raises Indonesia’s CPI by 0.8%.

Additionally, Indonesia’s fuel prices are partly subsidized by the government. Fuel subsidies cover about 30-40% of consumer fuel costs, accounting for roughly 15% of the government budget.

According to consultancy Capital Economics, Indonesia allocated 381 trillion rupiah (about 160 billion RMB) for energy subsidies through 2026, about 1.5% of GDP, based on an oil price of $70 per barrel. Finance Minister Sri Mulyani warned that if oil prices reach $92 per barrel, Indonesia’s fiscal deficit could rise to 3.6% of GDP.

Capital Economics also warned that fuel price hikes have previously triggered unrest in Indonesia. Fitch Ratings recently downgraded Indonesia’s sovereign outlook from “Stable” to “Negative.”

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Cover image source: interviewee provided