Asian governments spend billions to cushion economies from oil-price shock

Although the United States and Iran agreed to a two-week ceasefire, Asian countries are still facing major challenges as energy prices rise sharply. To cushion the negative impact on their economies and people’s livelihoods, many governments in the region have decided to spend billions of dollars to subsidize energy, according to Nikkei Asia.

Why Asia is under pressure

Because most Asian countries are net oil importers, higher energy prices have put considerable pressure on them. The region’s oil supply largely passes through the Hormuz Strait, a route Iran has blocked since the start of the war. Although Iran has said it would reopen this strait, experts say it will take several weeks for conditions to return to normal.

Relief measures: subsidies, price controls and targeted support

Asian governments have moved quickly with relief measures to mitigate the impact of the energy crisis. Subsidy measures include gasoline and diesel subsidies, tax cuts, and cash payments to households.

• Singapore: Announced a package worth S$1 billion (about US$778 million) for households and businesses. Transport Minister Jeffrey Siow said the government is working to ease concerns about living costs.
• Japan: Spent more than 1 trillion yen (about US$6.26 billion) to keep gasoline prices stable.
• Indonesia: Began distributing subsidized fuels. Finance Minister Purbaya Sudewa said the year’s fuel-subsidy bill could rise by 100 trillion rupiah (about US$5.85 billion) to 210 trillion rupiah.
• Malaysia: Tightened conditions to purchase subsidized fuel products.
• Thailand: Said it would try to keep subsidized diesel prices at 33 baht per liter, while removing subsidies for other diesel products to offset costs.
• China: Constrained the pace of gasoline price increases mainly through subsidies.
• Taiwan: CPC Corporation said residential natural gas prices would remain unchanged in April, while industrial prices would rise 5% and electricity production prices would rise 41.58%.
• Philippines: President Ferdinand Marcos Jr. declared an energy emergency and activated an emergency fund worth 20 billion pesos.

Several countries also cut taxes on fuels and petroleum products. In India, the measure is expected to cost 70 billion rupees every two weeks. South Korea also loosened or exempted some standards on chemical imports and packaging.

Support for low-income groups and specific sectors

• South Korea: Proposed an additional budget of 26.2 trillion won.
• Philippines: Provided cash payments for ride-hailing drivers.
• India: Temporarily halted LPG gas supply to commercial users to protect residential customers.
• Singapore: Expanded existing support programs and accelerated measures announced in the year’s budget to “reduce the immediate impact” of fuel price increases, according to Prime Minister Lawrence Wong.

Alternative supplies and energy-demand measures

Another common theme is the search for alternative fuel supplies, with countries such as Russia, Oman, Algeria, and Kazakhstan being sought by Asian nations to purchase crude oil and natural gas. Governments are also promoting renewable energy, including rooftop solar, and taking steps to reduce energy demand.

• Malaysia and Indonesia: Seeking to reduce energy demand by encouraging civil servants to work from home more regularly and urging private companies to do likewise.
• Malaysia: Said it would implement tighter controls to curb fuel leaks and smuggling.
• China: Rolled out an action plan to upgrade refineries and petrochemical plants and to convert coal to methanol.

Financing the response: trade-offs and policy adjustments

To finance energy-shock response initiatives, governments across Asia have faced difficult choices such as cutting program spending, raising taxes elsewhere, borrowing more, and drawing on national reserves.

• Indonesia: Trimmed back the top free meals program in certain areas from six days a week to five.
• Japan: Tapped 800 billion yen from foreign exchange reserves to cover energy subsidies.
• India and Indonesia: Considering windfall profit taxes on key export items—coal in Indonesia and aviation fuel in India.

Some measures also reflect supply concerns. In Korea, some local authorities are limiting bag purchases to one per customer due to fears of naptha shortages. Governments have also adjusted industry cost-sharing: in Indonesia, ministers said they would raise the aircraft fuel surcharge on passenger tickets to 38% rather than the 50% requested by airlines. The Philippines extended price freezes on essential goods to April 30, imposing extra costs on manufacturers and retailers.

Impact and outlook

These measures demonstrate Asia’s resolve to shield economies and people from global energy-market volatility. However, sustaining subsidies in the long term could pose significant financial and governance challenges. Experts say governments must balance short-term support with long-term sustainable development.