Three weeks after the outbreak of a war in the middle east that is shaking the energy markets, Asia faces one of the first important consequences of the oil shortageas jet fuel prices hit record highs and governments struggle to keep flights going.
Airlines canceled thousands of flights, stranding tens of thousands of passengers. The main energy suppliers of the region, as China, South Korea and Thailand, They are restricting exportswhile import-dependent countries, such as Vietnam, are forced to ration and ask others for help.
The acceleration of the trance offers a sign of what happens when oil supplies are suddenly choked by an unexpected crisis with no clear end in sight. The suffering is more acute in Asia, where countries depend on Middle Eastern oil and have limited reservesand experts warn that may portend more disruption if the war drags on.
“We are looking at what the future of gasoline and diesel will look like if this is not resolved,” said James Noel-Beswick, head of raw materials at the data firm. Sparta Commodities.
s. The region’s major energy suppliers, such as China, South Korea and Thailand, are restricting exports (Photo: The New York Times)
“Jet fuel is kind of the canary in the coal mine,” he said.
He Oil shortage risk spread across Asia just days after the United States and Israel went to war against Iran, paralyzing shipping through the Strait of Hormuz. About a fifth of the world’s oil flows through the narrow shipping corridor along Iran’s southern coast, with most ending up in Asia.
In the cities of India, people began to hoard liquefied gas oil, widely used for cooking. Bangladesh canceled university classes. The Philippines moved to a four-day work week. In Vietnam and Thailand, gas stations hung “sold out” signs as governments with limited reserves imposed emergency conservation measures.
Read also: The US affirmed that it “reduced” the threat from Iran over the Strait of Hormuz
Then there was a commotion that no one expected. He jet fuel price exceeded for the first time in history 200 dollars per barrelmore than double that before the war.
“These are unprecedented levels” stated Nikhil Ravishankar, CEO of Air New Zealandto a local media outlet last week, following the cancellation of some 1,100 flights with dates extending into early May.
The price of jet fuel rose faster and more dramatically than that of Brent crude, the global oil benchmark, which stood at $108.65 a barrel on Thursday, an increase of nearly 50 percent since the war began.
Jet fuel is often the first refined petroleum product to become scarcepartly because stricter quality standards apply to it than to other fuels. It must be stored in special tanks, which makes large reserves expensive, and it cannot be kept for long without degrading. As a result, there is less room to absorb supply disruptions. And unlike gasoline or diesel, which have more flexible supply chains, aviation fuel depends on specific components which are harder to replace, leaving fewer alternatives when supplies dwindle.
The structure of the global fuel system compounds the problem. The countries that extract crude oil are not usually the ones that refine it. South Korea, for example, is a major exporter of jet fuel, but relies heavily on imported crude oil, much of which comes from the Strait of Hormuz.
Countries like Australia have reduced their refining capacity over the years, making them more dependent not only on imported oil, but also on the willingness and ability of other countries to refine and sell it.
Asia faces one of the first major consequences of oil shortages. (Photo: REUTERS/Florence Lo)
China was one of the first countries to restrict exports of refined petroleum products, including jet fuel, days after fighting began last month. The measure had repercussions throughout the region, where China supplies at least half of the fuel consumed in some countries.
In the last few days, Thailanda major supplier to Vietnam, temporarily banned certain fuel exports, including aviation fuel, while South Korea limited exports of some gasoline and diesel products, further reducing aviation fuel supplies as refiners prioritize domestic demand.
Read also: Fuel prices have increased up to 16% so far in March and analysts warn of new adjustments
“We have seen a ban on exports of crude oil products, and China has been one of the first to do so,” said Neil Beveridge, director of research at Bernstein, a market research firm, citing conversations with traders and oil companies. These measures led companies to hoard oil in the expectation that the situation would only get worse, he said.
In Vietnamfear of rising prices and fuel shortages has spread panic. Hundreds of motorcycle drivers, the country’s main means of transportation, have lined up late into the night outside Hanoi gas stations.
The situation is so serious that Vietnam’s foreign minister and prime minister met with ambassadors and high-ranking officials of Vietnam. China, South Korea, Thailand, Japan and the United Arab Emirates to urge them to help, even sharing access to strategic reserves.
Almost three-quarters of Vietnam’s aviation fuel is imported, mostly from China and Thailand. Vietnam’s Civil Aviation Authority warned this week that jet fuel shortages could occur as early as April. Vietnamese airlines are considering rate increases and flight reductions to address rising costs and supply shortages. Even with higher prices, getting additional fuel remains a big challenge.
“Access to fuel supply is extremely difficult at the moment, as it depends entirely on external factors, particularly the conflict in the Middle East,” said Bui Ngoc Bao, president of the Vietnam Petroleum Association.
For Australiathe current shock is a situation long noted as a vulnerability due to national dependence on imports, even in the government’s own review. The country imports 90 percent of its fuel and, according to the energy minister, had 32 days of jet fuel at the beginning of March.
Local media reported that at least one fuel tanker bound for Australia had failed to load at a Chinese port in mid-March, stoking fears of shortages.
Three-quarters of Vietnam’s aviation fuel is imported, mostly from China and Thailand. (Photo: REUTERS/Sodiq Adelakun)
On Thursday, the prime minister, Anthony Albaneseassured the population that fuel supplies remained secure and attributed the shortage to panic buying, noting that demand had more than doubled in some regions. At the same time, he announced a fuel safety task force, and said he wanted the country to be “more than prepared.”
As part of the measures, Australia will also keep more of its domestically produced fuel in the country, he said.
“The conflict is an unprecedented shock to global energy markets” Albanese said, adding: “Australians are already noticing the consequences.”
The chief executive of Sydney Airport, which accounts for 40 per cent of the country’s aviation fuel consumption, said last week that the airport typically has reserves for about 25 days. But the reliability of those reserves “depends on international shipping routes, global refining capacity and geopolitical stability,” the executive, Scott Charlton, said in remarks at a summit on renewable fuels.
Of the war that now endangers all those fronts, he said: “We are quickly reminded how interconnected energy, aviation and geopolitics are.”
By Alexandra Stevenson, Aaron Krolik, Tung Ngo and Victoria Kim.