Oil
Buyers Battered by the Iran War Energy Crisis Race to Build Buffers
As rising
fuel costs clobber their economies, the Philippines and other developing
countries in Asia are pushing to build strategic petroleum reserves to cushion
against future shocks.
River
Akira Davis
By River
Akira Davis
River
Akira Davis has covered the energy shocks around the world stemming from the
war in Iran. She reported from Tokyo and Manila.
https://www.nytimes.com/2026/07/21/business/asia-strategic-oil-reserves.html
July 21,
2026
Rodela
Romero was attending an event at her church in northern Manila when her phone
rang. It was a local reporter asking her to comment on what was being described
to her as a nightmare scenario.
Ms.
Romero, who oversees the oil industry at the Philippine Department of Energy,
had been following news of the U.S.-Israeli strikes on Iran that day in late
February. Now, the reporter told Ms. Romero, the Strait of Hormuz — the vital
maritime choke point through which the Philippines imports enormous amounts of
crude oil — had been shut.
“We
import almost 100 percent of our petroleum products,” said Ms. Romero, 64.
“We’re so vulnerable,” she recalled thinking at the time.
In the
ensuing weeks, government officials scrambled to secure supply from alternative
producers, at great cost. Gasoline prices doubled and diesel prices tripled,
triggering transit strikes in Manila and a sudden spike in inflation that
experts warned could push more than a million Filipinos into poverty.
On March
24, President Ferdinand Marcos Jr. declared a national energy emergency. The
Philippines was the first country to take such a step, highlighting the view
that, outside the Middle East, the economic effects of the U.S.-Iran war are
primarily a crisis for Asia.
Developing
nations across Asia have been hit hard by the monthslong throttling of energy
flows because of their deep reliance on Middle Eastern oil and gas. As clashes
between the United States and Iran ramp up again, and shipping traffic in the
Persian Gulf nears a halt, regional capitals in Asia are assessing how to
prepare for a future of protracted instability.
The
Philippines is leading what is expected to be a wave of developing nations
seeking to build strategic petroleum reserves — stockpiles of crude oil that
can be tapped during disruptions. Japan is offering financing and technical
expertise, and officials in Tokyo say they are holding similar talks with
Indonesia, Thailand and Vietnam.
Japan’s
involvement is part of an effort to bolster its regional energy security,
according to Taro Han, a former official at Japan’s trade ministry, who
recently joined The Asia Group, a consulting firm. Even with its own
substantial stockpiles, Japan remains deeply dependent on Southeast Asian
supply chains for goods made with oil byproducts, including medical supplies.
Just as
the 1970s oil shocks transformed the global energy architecture — spurring 16
of the world’s largest economies to establish the International Energy Agency,
which requires member states to hold a 90-day cushion of net oil imports — a
similar structural shift is underway today.
The
question is whether, as electrification and renewable energy proliferate, it is
the right time for a wave of fast-growing, energy-hungry countries to commit
hundreds of millions of dollars to amass fossil-fuel reserves.
Over the
past five decades, the maintenance and periodic deployment of these reserves
have helped stabilize global supply and prices. In March, the I.E.A. set off
the largest coordinated release in its history to help steady oil markets after
the outbreak of fighting in the Middle East.
Yet the
release had a muted impact on economies in Asia that are heavily dependent on
Persian Gulf imports but don’t have national strategic reserves. In the
Philippines, the first and most dramatic effects were felt by drivers who faced
soaring fuel costs.
“The
impact on drivers’ incomes has been huge,” said Mody Floranda, the national
president of Piston, a labor coalition representing drivers of jeepneys — the
flamboyant, chrome-plated utility vehicles that zigzag along the streets of
Manila. Jeepney drivers charge a base fare of about 13 pesos, or 21 U.S. cents,
to ferry passengers who hop onto the open backs of their vehicles.
Mr.
Floranda, 60, was speaking from the group’s headquarters in Manila, a
wood-paneled room littered with megaphones, cardboard sardine boxes and protest
signs calling for economic relief and an end to “the U.S. war of aggression.”
He said
that the daily wage needed to support a family of five in the Philippines was
estimated to be around 1,200 pesos, or $20, but given the current fuel prices,
a driver who works 12 to 18 hours a day takes home only about 400 to 600 pesos.
“This is obviously not enough,” he said.
In April,
Piston filed a petition to raise fares by 10 pesos per ride to reflect higher
diesel prices. The group is awaiting official government approval. “Ten pesos
does not affect income that much,” Mr. Floranda said. “It’s merely to survive
the high price of oil.”
The
Philippine Institute for Development Studies, a state-run think tank, warned in
a report in April that crude prices of around $105 a barrel could push more
than 1.3 million Filipinos into poverty. Global oil prices rose above that
level in the early stages of the war, and though they have recently traded
lower, at around $90 a barrel, an uptick in fighting has incited renewed
volatility.
While the
acute-phase supply panic appears to have subsided, the economic damage is
lingering as higher fuel costs bleed through the economy, inflating the price
of everything, including food. “The impacts on poverty, welfare and growth are
still unfolding,” said Adoracion Navarro, a senior research fellow at P.I.D.S.
The Asian
Development Bank expects rising commodity costs to drag down growth. In a
report released this month, the bank lowered its growth forecast for developing
economies in Asia and the Pacific to 4.9 percent in 2026, a slowdown from 5.5
percent growth in 2025.
Recent
A.D.B. board meetings have been dominated by discussion about how best to
support the Philippines and other developing Asian countries particularly
vulnerable to oil-supply disruptions. Officials have debated whether to help
countries build emergency stockpiles or accelerate the transition away from
oil.
Strategic
petroleum stockpiles are expensive and time-consuming undertakings. Building a
90-day reserve is expected to cost nearly half a billion dollars for the
Philippines. Crude oil also has a shelf life in storage, meaning that costs are
ongoing.
Albert
Park, the A.D.B.’s Manila-based chief economist, said he was cautious about
recommending support for stockpiling oil.
“If you
have an option to just scale up renewable energy and reduce dependence, that’s
another way to build resilience,” he said. “Not to say you shouldn’t do it, but
you’d better have a clearheaded understanding of the costs and benefits of that
strategy because it’s expensive.”
Mr. Han,
the former Japanese trade ministry official, said that Tokyo was advocating
reserves that meet the I.E.A. benchmark of 90 days’ worth of demand. “We need a
more long-term, comprehensive approach in order to strengthen our energy
security in the region,” he said. Helping Asia build up reserves “is at the
very core of our diplomacy at this particular moment,” he said.
At the
Philippine Institute for Development Studies, Ms. Navarro thinks the answer is
to build a modest level of strategic reserves, while also pushing for
investments in energy efficiency, electric vehicle charging infrastructure and
Manila’s skeletal rail networks.
“A 90-day
reserve is a lot of money,” she said. “It’s I.E.A. levels, and we’re not yet an
economically advanced country.”
The
legislature in Manila is still conducting hearings on how to codify a strategic
petroleum reserve policy into law. The Department of Energy is also looking
into how to encourage the construction of more refineries, so that the
Philippines will have the capacity to turn crude reserves into refined products
like gasoline and diesel, according to Ms. Romero, the department official.
That was
another vulnerability exposed recently, when China halted exports of refined
petroleum products in March. It was a big blow to the Philippines, which relies
on China’s diesel supplies.
In her
office, tucked away in the back of a sun-bleached compound in Manila, Ms.
Romero recounted when she received the news of China cutting off exports via
another call from a local reporter.
That time
she wasn’t at church. “Otherwise, I would have just prayed,” she said. “Prayed
for a miracle.”
River
Akira Davis covers Japan for The Times, including its economy and businesses,
and is based in Tokyo.
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