How Asia became ground zero for the oil crisis

[0:00] Today, as the oil crisis moves into daily life, is Asia the canary in the coal mine? [0:06] Fuel prices in the Philippines are skyrocketing. [0:09] The price of diesel in particular has doubled. [0:12] Asia's being hit first by the oil shock from the U.S.-Israeli war on Iran, [0:17] but the rest of the world may not be far behind. [0:20] I'm Malika Bilal, and this is The Take. [0:23] Hey, everyone. [0:29] Today would be a really great day to subscribe to The Take on your podcast app. [0:35] We ask because we want more people to get their daily news podcasts from Al Jazeera [0:40] and leave us a review. [0:42] It helps other people discover the show you already know about. [0:45] Thank you. [0:46] My name is Veena Najibullah. [0:51] I'm the vice president of research and strategy at the Asia-Pacific Foundation of Canada, [0:55] and I am speaking to you from Vancouver, Canada. [0:58] Well, Veena, welcome back to The Take. [1:00] It's good to have you back on. [1:02] So there are a lot of really scary headlines when it comes to news around the U.S. [1:08] Israeli war on Iran, but outside of Iran, Lebanon, and the Gulf, [1:14] the most alarming ones might be coming from the rest of Asia. [1:18] So I'm going to just take off a few. [1:20] In Bangladesh, the war is making it harder to keep the lights on 2,000 miles away. [1:26] Sri Lanka announces four-day workweek, declares Wednesdays off to save fuel. [1:31] And the Philippines has 45 days of fuel left, declaring state of emergency. [1:38] You were just in the Philippines when the president declared that national emergency. [1:43] Take us there. [1:44] How did that go down? [1:47] Yes, you're absolutely right, Malika, that Philippines is 7,000 kilometers away from [1:53] the Middle East, and yet the impact of the war was felt almost immediately, both by the [2:00] government in terms of how the government had to scramble to try to make sense of it, [2:04] but also by average people. [2:06] And that's because Philippines is especially vulnerable. [2:09] It imports most of its crude from the Middle East, and it doesn't have a lot of reserves. [2:15] And average people really need this imported fuel for daily life, for obviously electricity, [2:24] but also for something like the transport. [2:27] I mean, what surprised me was one of the biggest group that was impacted right away were local [2:32] transport drivers, because they didn't have the fuel and that's their livelihood, right? [2:36] So for them to kind of be able to do that. [2:38] Oh, wow. [2:39] To be able to not work. [2:40] I mean, that's an immediate impact. [2:41] Same thing with fisheries as well, because they need to use diesel to take their boats [2:46] out in the sea, and that's also their livelihood. [2:48] So in some ways, Malika, just as it is happening in the front line where the people most impacted [2:54] are the poor, the same is happening in Asia, where obviously all countries are impacted, [2:59] but the countries that are not as advanced as, let's say, Japan or China or Taiwan are [3:04] impacted more, and then within those countries, the people who are already kind of struggling, [3:09] and living paycheck to paycheck, are now being impacted the most. [3:13] And you were there for your work as the vice president of the Asia Pacific Foundation [3:19] of Canada. [3:20] Tell me what that meant for your travels and what you heard from people that you talked [3:25] to about how this was going to impact them, not just in that day to day, but also in the [3:30] very near and coming future. [3:32] Yeah. [3:33] So actually when the war began, I was in India, and of course, India is next door, but also, [3:39] was feeling the impact right away. [3:41] And then I ended up in the Philippines, and then I ended in Taiwan, and three very different [3:46] stories, all very much impacted, but differently. [3:50] In the case of Philippines, one thing that I also noticed right away was my trip, it [3:54] was impacted because the government declared a four-day work week and also encouraged people [3:59] to work from home. [3:59] So I was there for a conference. [4:01] So that was an immediate disruption. [4:03] Because it was effective immediately? [4:05] Effective immediately, yes. [4:06] Wow. [4:07] And then there was [4:09] also regulations around the impact on somebody like me in terms of conferences, that's not [4:14] life or death. [4:15] But as I mentioned, there's much more serious consequences. [4:18] For a place like India, I mean, there was also an immediate consideration for about [4:23] 9 million Indians who work in the Gulf, right? [4:26] So, and who obviously were in harm's way, and their families were worried, but also [4:31] who sent remittances back to India. [4:33] So there's also like an immediate economic impact. [4:36] And then similarly, India gets most of its cooking, [4:39] gas from Qatar. [4:40] And when there was shortages of cooking gas, you of course saw this again at every level [4:46] of society. [4:47] So poor people who rely on it, but also even in expensive hotels, again, places where I [4:54] was finding myself, there was short, like restaurant closing, basically, because they [4:59] did not have the cooking oil available. [5:01] So the point being is that the war didn't feel very far away, it felt immediately like [5:07] the impact was across the border. [5:09] So what is happening in these parts of Asia? [5:13] And why are so many countries so severely hit? [5:16] Yeah, so the main reason is because of the effective closure of the Strait of [5:22] Hormuz. [5:24] The Strait, which is an air body of water, 20% of the energy, oil and gas of the world [5:31] goes through that Strait. [5:33] But majority of that goes to Asia. [5:35] So that's why countries from Pakistan to Japan were impacted. [5:40] The most like that entire region, because a most of them are very dependent on imports [5:46] of oil, they don't have domestic supply, and be most of that came through the Middle East [5:51] for them. [5:51] So they were the first ones to feel it. [5:54] And again, for countries like Japan and China, where they have strategic reserves of oil, [5:59] the impact was not as severe because the governments were able to step in and take immediate measures [6:05] for countries like Bangladesh and the Philippines and Pakistan. [6:10] And even India, the impact was more severe because the reserves are less. [6:14] So what they had to do was they had to introduce austerity measures, so encourage some kind [6:20] of essentially savings of, like I said, four-day workweek, working from home, closing universities, [6:28] as well as they brought in subsidies and price caps, basically, right, to try to keep the [6:34] prices as low as possible. [6:36] So you saw that in the Philippines. [6:38] You saw that in Vietnam. [6:39] You saw that. [6:40] Indonesia. [6:41] You saw that in India. [6:43] And then the other element, the governments, they really tried to look for other sources, [6:47] right, including Russia. [6:48] So when the US allowed Russian oil back into the market, removed the sanctions, that then [6:53] allowed countries like Philippines in particular and Vietnam to look at Russia as a potential [6:58] source. [6:58] But none of this is actually easy, Amalika. [7:01] I think what's really came home to me was how difficult these choices are. [7:06] Because for a country like, let's say, Indonesia, for instance, right? [7:09] They're already subsidizing their energy prices, for instance, fuel, because of the [7:17] fact that it's imported. [7:19] And they're spending about $22 billion in their budget already for these subsidies, [7:23] right? [7:24] And that was at a cost of oil at $70 per barrel, right? [7:28] So if it's now over $100, you can imagine what's happening with the budget, right? [7:33] So and then they also, in the case of Indonesia, their deficit cannot go more than three percent, [7:40] right? [7:40] So it's essentially asking governments to make really difficult choices. [7:45] If they don't subsidize, they're risking unrest. [7:48] If they do subsidize, there are issues around their budgets and how they're actually managing, [7:54] basically, their economies. [7:55] Well, you mentioned the possibility of future unrest. [7:59] So let's go there, because we know that the region that we're talking about, the countries, [8:04] are no stranger to political unrest. [8:06] And I think that's something that we need to look at. [8:08] Political unrest. [8:10] The past couple of years have been marked by mass protests and even revolutions, some [8:15] would call them, the so-called Gen Z revolutions. [8:19] I'm thinking of places like Nepal, Bangladesh. [8:23] Nepal's prime minister, Sharma Oli, has resigned after violent protests broke out [8:29] on Monday over a social media ban. [8:32] Demonstrators have defied an indefinite curfew, stormed parliament, and set fire to the residences [8:38] of the Nepalese president. [8:39] And the government is now calling for a new president and home minister. [8:44] Protesters stormed the residence of Bangladesh's prime minister, Sheikh Hasina. [8:48] In an address to the nation, the army chief confirmed Hasina had resigned and fled the [8:53] country. [8:54] So these governments are under immense pressure, I imagine. [8:59] And this could be a test, a test of their ability to deliver on what they've promised, [9:04] but now with this added stress on them. [9:07] Absolutely. [9:08] They have learned the lesson. [9:09] They have learned the lesson. [9:10] They have learned the lesson. [9:11] And we have learned the lesson. [9:12] And we've seen that the cost of living and especially fuel prices have a direct impact [9:17] on essentially social unrest and protests, right? [9:21] And again, we saw that as recently as last year in a place like Indonesia. [9:25] That's why they have the subsidies to begin with. [9:28] That's why they try to kind of control fuel prices. [9:31] But in the current situation, they really are not going to be able to do that for very long. [9:36] So that's why they're looking at other options. [9:37] But I think governments are trying. [9:39] They're trying to do that. [9:40] They're trying to do that. [9:41] And they're trying to do that in a way that's going to easily turn into a domestic political [9:45] issue, needing to make sure that they again are balancing the immediate needs of their [9:50] people and cushioning the impact, right? [9:52] So again, diversifying their supply, trying also to now make deals with Iran directly [9:57] to get their shipments through, right? [10:00] So, I mean, we're seeing more of that. [10:02] Even a country like Philippines is now in direct conversation with Iran to try to get [10:07] their oil tankers through the Strait. [10:09] I mean, it's closed, but it's not closed. [10:11] Iran has announced it is closed to those who attack it. [10:15] And so you're saying these deals might allow this restriction to ease a little bit for [10:21] some of these countries. [10:22] Yeah, I mean, we're seeing a lot of diplomacy. [10:25] So India was one of the first countries to directly engage with Iran to try to get relief [10:31] for its shipments. [10:34] And then we've seen the same thing now trickling down. [10:37] I think where things get a little bit trickier are, of course, for the U.S. [10:39] allies, countries like Japan, South Korea, because they have to kind of manage the U.S. [10:44] and Iran dynamic. [10:47] And again, there are no easy solutions. [10:50] I mean, I think, Malika, what really struck me, especially when I was in the region, was [10:56] how hard it is for governments to come up with choices. [10:59] Like even something like, for instance, they're committed, of course, to a net zero and to [11:04] managing climate effects, but they had to rely on coal again. [11:08] So in India, for instance, air pollution and quality of air is a big issue. [11:14] But in a situation like this, where people don't have cooking oil or when they're basically [11:21] livelihoods are on the line, of course, you have to do what you need to do. [11:24] And so they're bringing back, they're maximizing coal production right now to support electricity [11:30] needs. [11:30] And that has obviously impacts on health and net zero goals and so forth. [11:36] Wow. [11:38] Forgive the pun here, but Veena, is Asia the canary in the proverbial coal mine? [11:47] Absolutely. [11:48] So, yes, Asia has been kind of the front line of this, but we will be seeing some of these [11:54] impacts elsewhere because we've spoken a lot about energy. [11:56] But of course, there's also fertilizer and food. [11:59] And the longer this lasts, the more we'll see the impact on food and then also downstream. [12:05] So you need energy to be able to essentially produce things. [12:10] You need jet fuel to fly places. [12:12] So, I mean, there's the kind of immediate impact, but then there's also downstream impact [12:16] on everything from tourism to industry production to jobs and growth. [12:22] And so Asia very much the first one to be impacted in the most immediate and drastic [12:27] way. [12:27] But we'll start to see that happening in other parts of the world as well. [12:31] In Africa and Latin America, you'll see that in the inflation and cost of living. [12:37] So prices will go up, prices for everything. [12:39] Energy already, but then food will be next. [12:42] And then airplane tickets, the products that you buy, like even textiles that you buy from [12:49] Bangladesh or from Vietnam are going to go up in price because the cost of production [12:54] is going to go up. [12:55] And Malika, this is all coming on top of everything that we've already experienced in the last [12:59] five years, right? [13:00] I mean, we can think of 2026 being a really crazy year, and it has been. [13:04] I mean, it has been a crazy three months. [13:07] But we all live with it. [13:09] We all live with it. [13:09] We lived through COVID. [13:10] We lived through the invasion of Ukraine by Russia. [13:14] We lived through the trade war that the Trump administration introduced, right, which already [13:19] had issues. [13:21] So governments don't have a lot of reserves. [13:24] People are tired and exhausted. [13:26] Yeah, because, you know, you say governments don't have a lot of reserve. [13:30] But based on what you're saying, these compounding problems we're all about to feel, I, humans, [13:36] individuals, we don't have a lot of reserves either. [13:39] Yes, that's right. [13:40] To be able to withstand this, because this is going to be worldwide, right? [13:44] So earlier this week, we saw the European Commission urging people to work from home, [13:50] to drive less, to fly less. [13:52] We've seen similar pleas in Australia. [13:55] If you're hitting the road, don't take more fuel than you need. [13:58] Just fill up like you normally would. [14:01] Think of others in your community, in the bush and in critical industries, and over [14:06] coming weeks, if you can switch to catching the train, it's going to put us all back in [14:09] the workforce. [14:09] Yeah. [14:09] train or bus or tram to work, do so. That builds our reserves and it saves fuel for [14:15] people who have no choice but to drive. [14:17] The island nation of Mauritius announced they only had about 20 days of fuel stock. [14:23] And in Ethiopia's Tigray region, which is already on the brink of a potential war itself, [14:29] we saw a complete suspension of fuel supplies that was announced. [14:32] Yes. [14:33] You mentioned the pandemic. And when we hear world leaders start talking about travel restrictions [14:41] and how for the next little while things are not going to be easy, it's hard not to think [14:46] of what we lived through already and survived for those of us who did survive it. I've seen [14:52] people comparing this to March 2020, but I've seen others who compare it to the 1973 Arab [14:58] Gulf states oil embargo and the price shocks that came with that. [15:03] And some experts say it's not going to be easy. [15:03] And some experts are saying this is going to be much worse than that, or much worse [15:07] than the pandemic. [15:08] So I wonder what you make of these comparisons. Are they helpful or is it going to be so much [15:15] worse than what we imagine? [15:16] I mean, it's normal. We're all human and we want to have some kind of a point [15:21] of reference, right? We want to understand is this better or worse than something else [15:24] and how are we going to survive this? But I think one big difference is that COVID-19, [15:30] I mean, it was something we couldn't really predict it. It was not anybody's fault. [15:34] I think with this situation, certainly many people around the world see this as a war [15:41] of choice. They don't understand why this happened, why the US and Israeli governments [15:46] engage in this action. So I think the emotional reaction to this has been different in my [15:50] experience. Like when I speak to people, they respond very differently to this. I sort of [15:55] feel like this is the last thing that anybody needed, especially when, you know, you're [16:00] here and the objective now becomes to kind of reopen the Strait of Hormuz. It's like, [16:03] well, you're essentially saying now we need to wage this war to go back to where things [16:07] were before the war started, right? I mean, it just makes no logical sense. [16:11] And also, we're not just dealing with price shocks. We're also dealing with supply disruptions, [16:17] right? So, and there's no clear sense of when things can improve because it's even if there [16:22] was political will. So like in previous conflicts, there was this idea that when things end, [16:29] basically when there is a political decision to stop or to reopen supply, it's going to [16:33] happen. Otherwise, it would happen. In this case, we now have a destruction of infrastructure. [16:37] So it's going to take time, right? So the impact now is going to be prolonged. And I [16:41] think that's also something that, again, creates a very different emotional feeling. So this [16:47] is having a long term damaging effect on US strategic positioning around the world, right? [16:53] So to the extent that those people in Washington especially care about US influence, US reputation, [17:00] US credibility. And this is doing tremendous damage to us. [17:03] Well, Veena, finally, I want to end by confessing that, you know, before we started [17:10] this conversation, I had a discomfort with this topic. And maybe 20 minutes in is a strange [17:16] time to divulge it. But for some of us, this will be about paying a little more at the [17:23] gas station or delaying a flight because it might be more difficult. Some will experience [17:29] this as an inconvenience. And I think I count myself right now, at least in those. Well, [17:34] for others, this is going to be existential. For some people, it means loss of life, theirs, [17:40] their loved ones, their homes, everything they've ever known. So I think you have shown [17:47] me how high the stakes are throughout this conversation, but I want to end with this [17:50] for those who might still have this lingering discomfort. How do we process that? That, [17:56] for some, this will be so much harder than for others. [17:59] Yeah, you're absolutely right, Malika, and I can see why you would feel that discomfort, [18:05] because again, you're right. But you're getting it. And it's going to be tough for some of [18:06] right, that an inconvenience like a canceled flight is not the same as being in a war zone [18:10] and having your loved one killed. I grew up in Afghanistan and very familiar with [18:16] an immediate impact of war. So I recognize that we're all experiencing this at different levels. [18:22] But I think the point to bear in mind is that for some, even as far away as Philippines, [18:28] this is existential and it is about their livelihoods and their family and their [18:33] children's livelihood, right? The fact that schoolchildren were not able to go to school [18:37] in the Philippines because buses were disrupted because of a war in the Middle East is something [18:42] to bear in mind, right? And ultimately, this is about, again, understanding what's happening. [18:47] I think it would be easy to sort of say, okay, this doesn't impact me too much. I'll just pay [18:51] a little bit more or I'll drive less and not go to fill up my car as much. Yes, that's maybe the [18:58] case, but it won't stop there, right? So if we do have uprisings, [19:04] uprisings in these countries, then we're also dealing with issues of immigration, right, [19:07] and migration flows. So there's a cascading effect that will impact folks. And to the extent that we [19:15] can, we need to do our part, right? And I guess for myself, Malika, I kind of approach this from [19:20] the different levels of impact. So first, staying mentally calm and clear. So not looking away, [19:29] but also maintaining my psychological poise and mental calm, right? So figuring out, [19:34] like, how to take care of myself first to be able to show up the best that I can. And then to sort [19:39] of look around and saying, who's less better off than myself and how do I help others, right? And [19:45] then kind of moving beyond that sort of saying, how is this really impacting the country and the [19:50] globe and so forth? So I think that wasn't probably a clear answer, but my point is that if you think [19:57] you're not impacted by this, think again. But that doesn't also mean that you need to panic or you [20:04] need to sort of feel like, okay, well, all else is lost and I can't do anything. This is too big. We [20:08] can do something. And it starts with us in terms of not looking away, but also still staying calm [20:14] and collected, and then figuring out how you can help those who are less fortunate than yourself, [20:18] and then being in solidarity and extending that kind of circle of impact. [20:24] Thank you. I really appreciate what you had to say, and I appreciate you joining us here. [20:30] Thank you so much, Malika. Pleasure to speak with you.