Fuel Panic Grips Asia as Hormuz Strait Blockade Sparks Hoarding, Violence

Fuel supply anxiety is spreading across South and Southeast Asia as the Strait of Hormuz has been effectively blocked following armed clashes between the United States, Israel, and Iran.

Some countries are experiencing escalating chaos, with hoarding continuing and even a murder occurring at a gas station.

Murder at Gas Station as Fuel Panic Spreads

According to AFP and Reuters on the 9th (local time), the Bangladeshi government introduced purchase restrictions to prevent fuel hoarding. The state-owned Bangladesh Petroleum Corporation (BPC) implemented fuel purchase caps for most cars and motorcycles starting the previous day.

Under the new rules, motorcycle riders can purchase a maximum of 2 liters of fuel at a time.

Bangladesh, with a population of approximately 170 million, depends on imports for about 95% of its oil and gas demand. Despite government regulations, hoarding shows no signs of subsiding. Long lines of vehicles and motorcycles formed at gas stations in the capital Dhaka as people rushed to secure fuel.

Conflicts over fuel shortages have escalated into violence. On the evening of the 7th, a man in his 20s was killed during an altercation with a gas station employee in Jhenaidah district, Khulna Division, in southwestern Bangladesh.

The fuel supply crisis is also affecting industrial operations. AFP reported that five of six fertilizer plants in Bangladesh have suspended operations until the 18th of this month.

The crisis stems from the effective blockade of the Strait of Hormuz amid heightened Middle East tensions. After Iran was struck by U.S. and Israeli airstrikes on the 28th of last month, it retaliated by effectively blocking the strait, through which approximately 20% of global oil and liquefied natural gas (LNG) shipments pass. This has raised concerns about crude oil transportation disruptions.

Competition for fuel supplies is intensifying in South and Southeast Asian countries that are highly dependent on Middle Eastern crude oil.

In Vietnam, the government prepared emergency stabilization measures after the price of the most commonly sold gasoline rose 21% to $1.03 per liter. Vietnam's Ministry of Finance announced it has drafted a decree to reduce tariffs on some imported petroleum products from up to 20% to 0% to stabilize the domestic market and ensure energy security. The measure will be applied temporarily until the end of next month.

In Cambodia, fuel hoarding emerged as gasoline prices rose to $1.09 per liter. The government urged restraint, warning that excessive fuel storage could increase fire risks.

The Pakistani government also warned it would severely punish illegal fuel storage or supply manipulation, stating it is maintaining oil reserves in preparation for potential supply disruptions.

Bloomberg analyzed that India, which depends on imports for most of its oil and brings in a significant amount through the Strait of Hormuz, could also be significantly affected.

In response, the U.S. Treasury Department recently allowed Indian companies to temporarily purchase Russian crude oil and petroleum products for 30 days.

Sonal Varma, an economist at Nomura Holdings, said: "The purchase price for Russian crude (for India) is not cheap (compared to discounted February prices) because of the premium attached. Given the supply shortage situation, securing crude itself is more important than the purchase price right now."

South Korea Also at Risk—70% of Crude Imports from Middle East

Meanwhile, analysts warn that South Korea could also be affected if Middle East-driven energy supply instability becomes prolonged.

According to Korea International Trade Association statistics (K-stat), South Korea's crude oil imports last year totaled $75.3 billion, with Middle Eastern countries accounting for 68.8%. Saudi Arabia was the largest source at 34.2%, followed by the United Arab Emirates (11.7%), Iraq (10.9%), and Kuwait (8.4%).

South Korea's dependence on Middle Eastern crude has declined from the past. It reached 85.2% in 2016 but fell to 59.5% by 2021 as the country diversified its sources to include the U.S. and South America. However, dependence has risen back to around 70% recently amid growing global energy market instability following the Russia-Ukraine war.

Imports of U.S. crude oil, which emerged as an alternative source, have steadily increased. U.S. crude accounted for just 0.3% in 2016 but rose rapidly following the expansion of shale oil production, reaching about 17% last year. The U.S. is currently South Korea's second-largest crude oil supplier after Saudi Arabia. Crude imports from South American countries such as Brazil and Mexico, as well as West Africa, are also gradually expanding.