Think energy prices are high now? You ain’t seen nothing yet.
Driving the news: With the Strait of Hormuz now closed for nearly a month, nations across Southeast Asia and the Pacific region have been forced to find ways to cut energy use as their liquefied natural gas (LNG) supplies dry up. The strait accounts for around a fifth of global LNG supply and, unlike oil, there are no alternative routes and few stockpiles.
Measures range from Thailand making civil servants work at home to the Philippines declaring a national emergency and ordering government agencies to cut energy use by 10-20%.
Asian countries have ramped up other forms of energy where possible — for many this means a return to coal — and LNG’s reputation could be permanently hurt.
Zoom out: Comparatively, oil hasn't faced quite the same shocks. Prices are still soaring, but are a ways off from record levels. This is because defence mechanisms like strategic reserve releases, rerouted shipments, and (admittedly) Donald Trump’s reassurances that a peace deal is on the way have all managed to gird supplies and bring some market stability.
Yes, but: These strategies won’t work forever (especially the one that relies on Trump’s Truth Social account). As is, combined measures have only absorbed, at most, ~60% of pre-war oil levels. Outside of more reserve releases it's unclear what else major economies can do.
Why it matters: Developing Asia-Pacific nations present a picture of what’s to come for the rest of the world if this war drags on. A recent Macquarie report estimates oil will hit an unprecedented US$200 a barrel price if Hormuz remains closed til June. Not only would this mean absurd gas prices and stagflation, it would necessitate energy cuts for wide swaths of the world.—QH
