Southeast Asia remains highly exposed to global energy shocks. Recent volatility in global oil and gas markets has highlighted the continued exposure of Southeast Asian economies to external energy shocks. Although some countries in the region produce fossil fuels domestically, most remain net importers and are therefore sensitive to disruptions in international supply and fluctuations in global prices.
The Strait of Hormuz is a critical chokepoint for Asia-bound energy flows. As the main exit route for Middle Eastern oil and liquefied natural gas (LNG), the Strait plays a central role in global energy trade. In 2024, approximately 84% of the oil and 83% of the liquefied natural gas (LNG) transported through the Strait was destined for Asia.
Energy price volatility transmits quickly through Southeast Asian economies. Policymakers across the region have prioritised shielding consumers from price pass-through effects. Given energy’s role as a key intermediate input in transport, agriculture, and manufacturing, volatility in fuel costs propagates broadly across supply chains, weakening purchasing power and destabilising basic commodity prices.
The Philippines
On 25 March 2026, Philippine President Ferdinand Marcos Jr. signed Republic Act No. 12316, granting emergency powers to suspend or reduce fuel excise taxes once global oil prices reach a threshold of USD 80 per barrel. Any tax relief can be applied selectively and will last up to three months at a time, with a total limit of one year, and the authority is valid until the end of 2028. Taxes will automatically revert to normal once prices fall below the threshold or after the allowed period, and the government must report the policy’s impact on prices, inflation, and revenues to Congress.
Fuel subsidies are being rolled out for vulnerable sectors, particularly transport groups and heavily affected industries. These measures are complemented by broader cash assistance programmes intended to cushion households from rising living costs.
In addition, the Government of the Philippines has launched a PHP 2.5 billion (USD 46 million) fuel subsidy package for the transport sector to mitigate the immediate impacts of rising global oil prices on public mobility and livelihoods. The measure targets more than 245,000 drivers and operators across over 1.18 million vehicles, including buses, taxis, UV Express services, TNVS vehicles, tricycles, and delivery services. It is intended to prevent service disruptions, ease pressure on commuter fares, and stabilise income among vulnerable transport workers.
In addition, the Department of Agriculture is implementing a PHP 5,000 (USD 82) fuel subsidy for 9,570 mechanised farmers, supported by a PHP 50 million (USD 827,330) sub-allotment to help offset rising production and transport costs linked to recent geopolitical tensions in the Middle East.
The Department of Budget and Management has released PHP 20 billion (USD 332 million) from the Malampaya Gas Fund to the Philippine National Oil Company (PNOC-EC). This funding will be used to build up emergency fuel reserves, including diesel, gasoline, and LPG, with a target of up to 2 million barrels.
To reduce dependence on Middle Eastern oil, the Philippines has started sourcing crude oil from Russia after supply routes through the Strait of Hormuz became severely disrupted. A recent shipment of 700,000 barrels of Russian crude oil to Petron is part of the government’s emergency effort to secure alternative fuel supplies and prevent shortages in the country.
Demand reduction policies have also been implemented across the public sector. These include a temporary four-day workweek in government offices and directives to reduce fuel and electricity consumption by 10–20%. Operational expenditure cuts, restrictions on travel, reduced in-person meetings, and limitations on fuel-intensive activities are intended to lower public sector energy demand while signalling conservation efforts to the broader economy.
To reduce this impact, the DOE has introduced emergency operating measures that prioritise the use of renewable energy, indigenous energy sources, and coal, while improving fuel management and system dispatch to keep the power supply stable and protect consumers from further price spikes.
The government is moving faster to bring renewable projects to help strengthen the power supply during the energy crisis. While these projects cannot replace gas-fired power immediately, faster renewable energy deployment can help reduce pressure on the grid, improve energy security, and lower dependence on expensive imported fuels.
Thailand
On 6 March 2026, the Ministry of Energy stated that Thailand’s petroleum reserves (including domestic stockpiles and in-transit cargoes) were sufficient for around 65 days of domestic consumption, or 90–95 days on a basis of confirmed purchase orders. At the same time, Thailand has continued to diversify crude sourcing, with roughly 42% of imports now coming from outside the Middle East, reducing exposure to supply disruption from any single region.
While Thailand has reserves and diversified import sources, the Oil Fund continues to function as a key shock absorber embedded within the country’s normal oil price management mechanisms, helping cushion short-term price spikes, although prolonged high oil prices would still create mounting fiscal and economic pressure. The government implemented a 15-day fuel price stabilisation period from 28 February, keeping diesel prices capped at THB 29.94/litre (USD 0.92), while gasoline prices remain supported by the Oil Fund. More recently, gradual price increases have been introduced to balance fiscal burdens while delaying sharper adjustments in the future.
Targeted subsidies funded through emergency budgets are being deployed to support vulnerable groups facing rising living costs. On 26 March, the cabinet approved THB 1.3bn (USD 40 million) from the central emergency budget to raise monthly support for 13.4 million vulnerable citizens, alongside sector-specific measures including fertiliser subsidies, fuel support for public transport operators, and a soft-loan package for SMEs.
Thailand has temporarily halted refined oil exports to Singapore and redirected supply towards the domestic market. Under Prime Minister’s Order No. 3/2026, issued in mid-March under the Emergency Decree on Remedy and Prevention of Shortage of Fuel Oils, the government has also moved to tighten control over fuel distribution during the Middle East crisis. Exceptions remain for Laos and Myanmar because both are tied into Thailand’s energy system, with Laos supplying hydropower and Myanmar continuing to provide pipeline gas for power generation.
The government is also diversifying crude oil and LNG imports, increasing sourcing from the United States, South Africa, and Malaysia. Thailand is also in talks with U.S. LNG supplier Cheniere Energy to increase contracted LNG imports from 1.0 million to 1.3 million tonnes per year and bring forward part of the deliveries from 3Q26 to 2Q26.
On 26 March 2026, Thailand secured safe passage for its oil tankers through the Strait of Hormuz by coordinating directly with Iran and Oman, helping ensure key shipments could continue despite regional tensions.
Energy-saving campaigns are being prepared alongside the launch of the FuelNow application, which will display petrol station operating status and fuel availability to reduce panic buying.
Viet Nam
On 4 March 2026, Vietnamese Prime Minister Pham Minh Chinh signed Decision 385/QD-TTg, a formal directive issued as an emergency response to stabilise the national economy following a sudden escalation of conflict in the Middle East.
The Petrol Price Stabilisation Fund has been deployed to subsidise retail fuel prices by approximately 3,000–4,000 VND (USD 0.11–0.15) per litre. However, as the subsidy rapidly depleted the fund by mid-March 2026, authorities approved an additional VND 8 trillion (USD 303.74 million) under Decision 483/QD-TTg on 27 March 2026 to sustain fuel price support and avoid a full pass-through of global oil price increases to domestic consumers.
Viet Nam has temporarily reduced the environmental protection tax, VAT, and special consumption tax on petrol, diesel, and aviation fuel to zero from 27 March to 15 April 2026. The emergency measure is intended to stabilise fuel prices and protect energy security as global oil prices rise above USD 100 per barrel due to tensions in the Strait of Hormuz. The government expects the tax cuts to reduce business costs, maintain stable domestic fuel prices, and support economic activity.
The government is accelerating the roll-out of E10 biofuel beginning in April 2026, with nationwide implementation scheduled for 1 June 2026. This replaces the 2012 biofuel roadmap, which has been officially scrapped in favour of a new policy under Circular 50/2025/TT-BCT. Fuel distributors appear largely prepared, with major firms such as Petrolimex and PVOIL already piloting E10 and possessing sufficient blending capacity to meet national demand. However, domestic ethanol production remains limited, meaning Viet Nam will likely need to import up to 60% of its ethanol requirements initially while expanding local supply and refining regulations.
Viet Nam is also diversifying fuel supply sources to reduce exposure to Middle East disruptions and maintain domestic market stability. Petrovietnam has increased crude and fuel imports, supported ethanol sourcing from domestic producers as well as the United States and Brazil, and prioritised output at the Dung Quat and Nghi Son refineries, which together supply around 70% of national fuel demand. These short-term measures are being reinforced by longer-term plans to expand strategic fuel reserves, secure more stable import contracts, and strengthen domestic oil and gas production.
As part of its longer-term response to energy market disruptions, Vietnam is revisiting nuclear power. During Prime Minister Phạm Minh Chính’s visit to Moscow, Hanoi signed an agreement with Russia for the Ninh Thuan 1 nuclear plant, reviving plans that were shelved in 2016 over cost and safety concerns. The project would involve two Russian-designed reactors with a combined capacity of 2,400 MW, as Vietnam looks for more stable and lower-emission energy sources amid renewed volatility in global fossil fuel markets.
Indonesia
Indonesia’s policy response to recent energy market volatility is shaped by a long-standing legal and institutional commitment to energy security. Under Law No. 30/2007 on Energy, Government Regulation No. 40/2025, and Presidential Regulation No. 96/2024, the Government of Indonesia (GoI) is mandated to safeguard national energy security and strengthen energy independence.
Although Indonesia has diversified its energy mix over the past decade, its refineries remain structurally dependent on Middle Eastern crude. According to Energy Minister Bahlil Lahadalia, around 20–25% of Indonesia’s crude oil imports, mainly from Saudi Arabia, normally pass through the Strait of Hormuz, leaving part of the country’s oil supply exposed to disruption along this route.
In response, the government has stated that it will seek to shift some crude imports towards suppliers in the United States, Africa (including Angola), and other countries whose shipping routes do not rely on the Strait. It also plans to build additional crude oil storage facilities to increase reserves to a three-month supply buffer, up from the current level of around 25–26 days.
Back in February 2025, Indonesia signed an Agreement on Reciprocal Trade (ART), with the United States to purchase USD 15 billion in US energy products. While this offers a more stable alternative to supplies routed through the Persian Gulf, refinery limitations— particularly at the 348,000 b/d Cilacap refinery in Central Java — restrict how much Middle Eastern crude can be replaced, since the facility is designed to process heavier oil grades.
At the same time, Indonesia is increasingly linking energy security concerns with structural transition measures. The establishment of an Energy Transition Task Force in March 2026 signals an effort to reduce exposure to oil price volatility by scaling up renewable energy and reducing dependence on diesel-based power generation. This reflects a broader recognition that energy transition policy can also function as a tool of fiscal risk management.
Energy subsidies and compensation payments remain a key pressure point in Indonesia’s response. More broadly, higher oil prices can also worsen the fiscal balance when the government absorbs part of the increase through fuel and electricity support measures. Each USD 1 per barrel increase in oil prices is estimated to widen the fiscal deficit by around USD 400 million. While the state budget is considered sufficient as a short-term shock absorber, energy efficiency measures are increasingly being evaluated as complementary policy tools.
Although Indonesia produces around half of its domestic oil needs, it remains heavily exposed to global price volatility through its import requirements and longstanding subsidy framework. As oil prices moved above the assumptions used in the state budget following escalation in the Middle East, the government faced a familiar trade-off: absorb the increase through higher subsidy costs, pass some of the burden on to consumers through fuel price adjustments, or reallocate spending from other priority programmes.
ASEAN
At the regional level, ASEAN is reinforcing collective energy security mechanisms in response to heightened supply risks arising from the Middle East conflict. Following the 32nd ASEAN Economic Ministers’ Retreat, member states agreed to accelerate the finalisation of the ASEAN Petroleum Security Agreement (APSA), which would enable countries facing significant fuel shortages to access emergency support from regional partners. This reflects broader concern over volatility in global oil and LNG markets, particularly given ASEAN’s continued dependence on Gulf energy imports.
In parallel, ASEAN is advancing complementary measures, including the ASEAN Power Grid, the Trans-ASEAN Gas Pipeline, contingency reserves, and greater diversification into renewable and alternative energy sources, to strengthen the region’s longer-term energy resilience.
Managing Energy Volatility in Southeast Asia
Despite varying domestic energy resources, our analysis shows that the four countries remain vulnerable as net energy importers, prompting governments to adopt policies aimed at stabilising prices, protecting consumers, and strengthening long-term energy security.
Across the region, policy responses fall into several common categories:
1. Short-term price stabilisation
Governments are prioritising measures that cushion households and businesses from rising fuel costs. These include subsidies, fuel price caps, tax reductions, stabilisation funds, and targeted financial support for transport operators, farmers, and vulnerable populations. Such interventions aim to limit inflation spillovers across transport, agriculture, and manufacturing supply chains.
2. Supply security and diversification
Countries are reducing dependence on Middle Eastern energy supplies by diversifying import sources and expanding reserves. Indonesia and Thailand are broadening crude and LNG sourcing, the Philippines has secured alternative oil shipments, and Viet Nam is increasing imports while maximising domestic refinery output.
3. Fiscal risk management
Energy volatility is placing growing pressure on public finances due to subsidy costs and stabilisation measures. Governments face trade-offs between maintaining price support, passing costs to consumers, or reallocating spending from other policy priorities, highlighting the fiscal vulnerability created by prolonged high oil prices.
4. Demand management
Several governments are encouraging energy conservation through public-sector demand reduction, efficiency measures, and awareness campaigns to moderate consumption during periods of market stress.
5. Acceleration of energy transition policies
Beyond crisis response, energy transition initiatives, including renewable energy expansion, biofuel adoption, and reduced reliance on fossil fuels, are increasingly viewed as tools for long-term economic resilience and protection against external price shocks.
Written by Palita Srichaisuphakit, Communication Officer, CASE for Southeast Asia at GIZ
