As the Iran war crunches global energy supplies and disrupts prices, Southeast Asian leaders may need to diversify oil and gas supplies in order to protect ordinary people.
However, they must also look beyond short-term remedies and seek to get their countries off the fossil fuel rollercoaster. As well as building out renewable energy generation and modernising the grid so it can handle the new power, the region should be more prudent about importing gas and turbocharge electric vehicle (EV) adoption.
Road transport is a key driver of oil demand in the region, and gas is a core part of several countries’ power supply. The crisis in the Strait of Hormuz is disrupting roughly one-fifth of global oil and liquefied natural gas (LNG) flows. Of the gas exported through the strait last year, 90% was destined for Asia.
Southeast Asia has been a net importer of oil for over two decades. With its population growing, the region’s meeting of its demand continues to rely on a 1990s model: more car and fuel subsidies; more imported cooking fuels; and a continued push to build even more gas power capacity. Yet its oil and gas production has been decreasing.
Indonesia’s oil production peaked in the 1990s, and it now imports 60% of its needs while spending tens of billions of dollars annually on fuel and electricity subsidies to keep prices stable for households. Thailand’s gas production has been declining since the mid-2010s, yet it still generates about 65% of its power from the fuel; and, in 2023, it imported nearly half of its gas supply, according to the International Energy Agency (IEA).
Though the region as a whole has been pushing to produce more gas, largely via drilling, the implication is clear: however quickly countries try to ramp up production, demand on its current trajectory will continue to far outpace supply growth. Southeast Asia is on track to become a net gas importer.
To secure its energy future, the region needs to accelerate the electrification of its transport sector via EV adoption and strengthen its clean energy development, opening a credible path towards energy self-sufficiency.
The impact of EV adoption
People often dismiss the benefits of EV adoption when fossil fuels’ share in the energy mix is still high. But there is another pathway: electrify and open up possibilities of powering the sector through green energy. Even when powered by a fossil-fuel-heavy grid, EVs produce less emissions over the vehicle’s lifetime than conventional cars by avoiding tailpipe emissions once on the road, eventually reaching a “breakeven” point, as research by BloombergNEF has shown.
More importantly, increased EV adoption enables the region to decouple from fossil fuels as the grid cleans up, while gasoline and diesel vehicles offer no comparable exit path. Clean electricity creates a route to both lower emissions and greater energy self-sufficiency.
In 2025, 2.3 million barrels of daily oil use were avoided through the global EV fleet, BloombergNEF estimates. This represents a mere 2% of global oil demand, but is a clear signal of an alternative path.
China chose the EV route partly to reduce its reliance on oil imports, which account for around 70% of its needs. That strategy is estimated to have yielded results amid the Gulf energy crisis. For Southeast Asian countries to do the same, its governments need to increase public and political support for greater EV adoption. They should do this by working with electric automakers to boost EV manufacturing and create local jobs, as well as by establishing charging infrastructure.
Gas as a stable transition fuel?
With Asian LNG prices remaining highly volatile amid the global energy crisis, the narrative of gas as a stable transition fuel is beginning to unravel. The crisis has exposed the risks of rapidly expanding gas’s share in Southeast Asia’s power mix.
Gas has been widely promoted as a stopgap measure to achieve the region’s aims of reducing its coal dependence and CO2 emissions while it grows its renewable power. Research by the Energy Shift Institute, where I work, shows that many Asian governments count gas as part of sustainable investments. But though gas combustion does result in less emission than coal, when leakage occurs in its value chain it is 80 times more potent as a climate heater than CO2.
There is also the premium on imported LNG from distant suppliers, which is significantly more expensive than domestically produced piped gas.
Gas is far harder than oil to stockpile, making it riskier for import-dependent economies. This vulnerability was evident during the 2022 energy crisis brought on by the war in Ukraine, when LNG prices surged and cargoes originally bound for Pakistan were diverted to Europe as traders sought to capitalise on higher prices. Similar episodes are likely to recur in future supply shocks.
There will be a place to develop some local resources and stockpiles. As with oil, gas will continue to have a role to play as an energy and industrial material input, particularly in industries with limited alternative technologies, such as fertiliser.
China can again be looked to as an example, with an 8% gas share in its total energy supply in 2023, nearly 40% of which was imported. This, combined with its rapid renewables growth, reveals a clear underlying logic: limit exposure to imported energy while reserving gas for purposes that critically need it.
Continuing to rely on gas imports threatens to lock Southeast Asia into the same vulnerability it is only beginning to reckon with on the oil front.
Its governments and utilities routinely cite high upfront costs as a barrier to building renewables and modernising grids, yet sign long-term LNG import contracts without similar scrutiny. They are also burning through cash during the Gulf crisis: Malaysia’s bill for subsidies to stabilise retail fuel prices for consumers has shot up by over ten times. Meanwhile, Indonesia’s fuel subsidies to keep prices affordable for households and motorists are estimated to cost the state IDR6.7 trillion (US$387 million) per US dollar increase in the price of oil. This raises the urgent question of how budgets can best be deployed to secure energy supply for the region.
Short-term fixes during crises are crucial, but true leadership in establishing a secure energy supply requires long-term visionary goals. Competing government budgetary priorities and the need to secure immediate energy supplies understandably pull attention toward familiar remedies such as diversifying oil and gas suppliers and creating more emergency stockpiles.
But in energy, there are no quick fixes; the key is in pursuing a steady direction. Southeast Asia has yet to fully explore exit routes that can reduce its exposure to oil and gas supply shocks. The 1970s oil crisis sparked the emergence of renewables, and the current crisis may prove equally defining for the world’s energy systems.
Clean energy deployment must be accelerated. The transition will take time, but the starting point is clear: governments need to electrify as much as possible before the next crisis peeks its head around the corner.
Top photo: Electric cars at a charging station in Bali, Indonesia. Photo by Carrot via Alamy.
Putra Adhiguna is the managing director of Energy Shift Institute, an Asia-focused energy finance thinktank.
This article was originally published on Dialogue Earth and was republished with permission. Read the original article on Dialogue Earth here.
