Oil shock will hit Asia harder than in the 1970s

By David Fickling

THE DIZZYING changes wrought by energy shocks are only ever seen in the rearview mirror.

When the 1973 and 1979 oil crises first swept the world, analysts assumed the future would be business as usual. Crude demand from Western Europe would remain broadly stable throughout the 1980s, according to a for the Central Intelligence Agency. The Organization for Economic Co-operation and Development (OECD) that its imports would rise to 35 million barrels by 1985.

Things didn’t turn out that way. Faced with a sevenfold increase in the cost of crude, Europe began a radical shift. A in France, powered by North Sea gas in England, and a connecting Germany to immense Siberian gas fields, shredded earlier forecasts. By the mid-1980s, Europe’s gas consumption had more than doubled from its level in 1973, but oil fell 20%. Crude imports slumped 30% to barely more than half what the OECD had expected.

We’re seeing the first tremors of a similar earthquake now in Asia. More than 80% of the oil and gas that passes through the Strait of Hormuz heads east. Like Europe, most of the region is fundamentally short of petroleum, and getting more so with each passing year. Japan and South Korea have long been among the most import-dependent countries on the planet for their energy supplies, but the whole region is heading in the same direction.

Vietnam became a over the past decade, and even petroleum-rich Malaysia is now a . Indonesia still subsidizes fuel like the OPEC member it was for decades, but it’s been reliant on imports for more than 20 years. Domestic gas fields that sustained growth in Bangladesh, Pakistan, and Thailand in previous decades are now giving out, leaving the countries at the mercy of costly, faltering LNG imports.

Shortages and price rises for fossil fuels are already starting to hit consumers in a way that will upend previous forecasts as dramatically as the 1970s oil shocks.

In Seoul, the average price for kalguksu — a noodle soup that’s a traditional homely comfort food — ($6.79) for the first time in March, as inflation climbed to 2.2% due in part to rising energy import costs. In Japan, where food prices last year, are drifting closer to a psychologically important ¥1,000 ($6.27) threshold. Low-cost public bathhouses are , squeezed between the rising cost of heating oil and government-regulated prices.

Such wealthy countries have significant tools to cushion the impact of this emergency. Energy prices in Japan actually fell 5.7% in March, as subsidies and the release of 80 million barrels of oil from strategic reserves dulled the effect of the war in Iran. The number of people for the Golden Week public holiday starting this week has risen strongly. A prolonged crisis that erodes emergency government support will dim such euphoria, though. Japanese consumer confidence last month had already fallen to its lowest level since last May.

Travel across the region will be particularly badly hit. With jet fuel prices in Singapore doubling to their highest levels on record, airlines in Southeast Asia have cut their , according to Cirium, an aviation consultancy. Thai Airways canceled between Bangkok and Seoul. Cathay Pacific Airways Ltd. is now putting a $200 surcharge on long-distance flights, sufficient to add $800 to the price of a return ticket between Australia and Europe.

The effect on the roads is yet more dramatic. Pakistan, the Philippines, and Sri Lanka have introduced four-day weeks to reduce the amount of gasoline and diesel used in commuting. Drivers of jeepneys in Manila announced at demanding cuts to fuel taxes, as rising costs threaten to wipe out their livelihoods. With some reporting an thanks to the rising cost of fuel, one driver interviewed by local media was reduced to to save on rent.

Further down the scale, are having to decide whether they can afford to spare money for fertilizer, as prices rise due to halted exports of urea from the Persian Gulf. The hit to living standards can be brutally direct: Pakistan is for more than two hours during each daily peak after flows of LNG from Qatar dried up. That translates into insufferable conditions in places like Lahore, a city of 15 million people where daytime temperatures are topping 40° Celsius (104° Fahrenheit).

All this is driving a rush for alternatives — and the winner each time is clean energy.

In India, shortages of LPG — widely used in cooking — have sparked lengthy queues, , and a run on that cost the same as roughly three gas bottle refills. Consumption of LPG in March compared to a year earlier.

In Australia, auction sales of doubled in March. At the Bangkok International Motor Show earlier this month, Chinese EV brands accounted for , overwhelming Japanese automakers used to dominating the local market. Vietnamese EV-maker Vinfast Auto Ltd. plans to sell about in overseas markets this year than in 2025.

Battery-only models have already reached in recent months in Singapore and Thailand, and about a third in China, Indonesia, South Korea, and Vietnam. Even before the war, billions of drivers in Asia were looking for an alternative to the cost and pollution of petrol power, and in numerous markets electric models were already as cheap as conventional vehicles.

In the Philippines, imports of solar panels from China during March alone were sufficient to increase total solar capacity by half, relative to levels at the end of 2025. In Cambodia, Indonesia, Malaysia, and Pakistan, trade was sufficient to boost installations by a quarter or more. One told local news site Rappler that they were signing as many as 10 times more contracts per month than they were before the war.

Hardly anyone predicted the conflict that is catalyzing this revolutionary shift. But the direction of travel has been clear for years, as the costs of clean energy have slumped below those of fossil power almost everywhere, and China’s solar, battery, and electric vehicle industries have grown into world-beaters. In betting that trade barriers, institutional roadblocks, and misinformation would hold back the tide of new technology, industrial companies elsewhere made a fatal wager on fading carbon-intensive technology.

As with Europe in the 1970s, Asia is a crucial region in forecasts for fossil fuel consumption growth. In BP Plc’s latest energy outlook, emerging Asian countries account for in LNG usage. About 70% of the global increase in oil demand out to 2035 will be in Southeast Asia and India, according to the International Energy Agency*.

The global petroleum industry is counting on robust consumption growth in Asia to justify the investments it will make over the coming years. But the crisis in the Strait of Hormuz is giving consumers and governments in the region compelling reasons to seek out alternatives. The decision of the United Arab Emirates this week is yet another reason to defect since it’s likely to erode the ability of the cartel to stabilize prices, leading to more volatility for importers. With China’s exports of solar panels, electric vehicles, and lithium-ion batteries all , a superior energy system is waiting in the wings, ready to be adopted.

Europe’s oil demand never recovered from the shocks of the 1970s. If the crisis in the Strait of Hormuz doesn’t end soon, a yet more dramatic transformation awaits in Asia. n

BLOOMBERG OPINION

*That’s based on the IEA’s Current Policies Scenario, which tends to oil consumption. Under its more accurate Stated Policies Scenario, declines in consumption elsewhere mean that increases in oil demand in India and Southeast Asia are more than seven times greater than the global total.