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AsianOil COMMENTARY AsianOil
South Asia’s energy crisis set to worsen
The energy crisis gripping South Asia looks set to worsen as fuel suppliers increasingly hold back from selling oil to the region
POLICY
WHAT:
South Asia’s energy crisis looks set to worsen.
WHY:
A growing number of fuel suppliers is avoiding
the region while some banks have also stopped financing energy imports.
WHAT NEXT:
There is speculation about current conditions spiralling into a new financial crisis.
SOUTH Asia is struggling with an ongoing energy crisis that shows no signs of abating, and indeed looks set to worsen instead. More and more fuel suppliers are increasingly hesitant to sell oil to the debt-ridden countries in the region, and some banks have also stopped financing and facilitating payments for energy imports.
Governments in the region are turning to measures including implementing power cuts and energy rationing and seeking financial assistance in a bid to turn things around before the crisis worsens. Nonetheless, there have been warnings that the situation could spiral.
Under pressure
The crisis across the region has been exacerbated by commodity prices rising in the wake of the war in Ukraine and reaching levels at which South Asian countries would struggle to afford to buy fuel. Countries that are heavily dependent on energy imports while also having low foreign exchange reserves – including Pakistan and Sri Lanka – have been particularly vulnerable to current market conditions.
While commodity prices have dropped back at least somewhat since earlier this year, weak currencies have kept energy import costs pro- hibitively high for some countries, including those in South Asia. Now, the situation is being exacerbated by fuel suppliers being increasingly hesitant to sell oil to the region and certain banks stopping financing energy imports or facilitating payments for them.
Fuel traders have been reported as saying they are hesitant to sell refined products such as gasoline and fuel oil to Pakistan in particu- lar on concerns that it could struggle to make payments. Pakistan State Oil received just one offer to sell the products in July, having had up to eight companies participating in pre- vious gasoline tenders. Data from Vortexa show that its imports of gasoline, diesel and fuel oil were down 15% month on month as of July 19.
The country has also struggled to secure LNG cargoes on the spot market recently, receiving a record-high bid for one cargo, which it ended up turning down. And while some banks are
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