Hormuz crisis highlights Asia’s need for larger oil reserves, closer supplier ties

The Strait of Hormuz crisis has underscored the urgent need for Asia to prioritize energy security as a core component of its policies, maintain adequate reserves of crude oil, refined products, and LPG, and foster closer collaboration with global partners, according to Atul Arya, chief energy strategist at S&P Global Energy. Speaking at the APPEC conference in Singapore, Arya emphasized that energy security must form the foundation of robust energy policies for all countries.

He highlighted that China and Japan have coped with the crisis better than other Asian nations due to their proactive approach in building sufficient reserves of critical commodities, such as crude oil, refined products, and natural gas. Arya pointed out that while both countries are heavily reliant on Middle Eastern oil, their strategic reserves have helped mitigate the impact of supply shocks.

In contrast, other major Middle East crude oil importers, including India, Thailand, and Pakistan, possess minimal strategic stockpiles. To address this issue, Arya urged these countries to increase their reserves of key commodities, diversify their supply sources, and invest in technologies that can bolster long-term supply security.

He stressed that while these actions may lead to higher energy costs, they are a worthwhile investment for enhancing energy security. Arya also stressed the importance of cross-sectoral collaboration in Asia's energy transition, involving governments, corporations, financiers, and technology providers. On the demand side, promoting electrification across sectors can reduce reliance on fuel imports, while robust energy-efficiency programs can help manage demand.

On the supply side, countries with domestic coal resources, such as India and China, may increase their coal consumption. Additionally, Arya suggested that Asian economies should build out domestic resources, including wind, solar, battery storage, nuclear, and geothermal power, to reduce import dependency. He emphasized that long-term resilience in energy systems requires a diversified mix of renewables, gas, coal, hydropower, and emerging technologies like hydrogen and carbon capture, utilization, and storage.

Policymakers must strike a delicate balance between reducing emissions and maintaining affordability, reliability, and industrial competitiveness.