Energy stress is now visible across the global system — but advanced economies and emerging markets are responding in very different ways.
The attrition is underway.
Stress fractures are now visible at both ends of the global economic spectrum, and the ways countries are responding tell you a great deal about where the pressure is most acute.
Advanced economies are leaning on policy tools.
Emerging economies are already moving toward rationing — even if the language used to describe it is deliberately less alarming.
In developed markets, governments still have room to manoeuvre.
We are already seeing measures such as:
These mechanisms allow governments to manage supply shocks without openly acknowledging rationing.
Emerging economies do not have the same policy buffer.
Instead, they are moving much closer to outright rationing, albeit dressed up in softer terms:
In some cases the measures extend beyond fuel markets entirely:
These are early indicators of energy stress cascading through the wider economy.
Australia is relatively insulated from the immediate disruption.
The country has no meaningful exposure to Arabian Gulf crude, nor significant reliance on refined product imports from that region.
That has historically been a price decision rather than a geopolitical one, but it now provides a small advantage: no sudden refinery reconfiguration is required.
However, sourcing finished refined products could become problematic if exporters such as Japan, Korea or Taiwan withdraw from international markets.
If diesel and jet fuel become national security priorities, those export flows could disappear quickly.
BP will be watching the Kwinana facility closely. The refinery stopped processing crude in 2021, leaving Perth almost entirely dependent on imported refined products.
Precarious Perth indeed.
Japan’s pivot toward WTI is going to hurt slightly.
The refining system is not accustomed to processing such large volumes of light sweet crude.
For the moment, a combination of existing medium sour deliveries and releases from strategic reserves will provide breathing room while refineries adapt toward heavier shale diets.
Conveniently, Japan operates one of the world’s largest VLCC fleets, allowing it to control much of its own logistics.
Idemitsu has already sent two VLCCs to the US Gulf Coast — something that would have looked unusual only weeks ago.
Japan will likely remain comfortable on gasoline and naphtha, but diesel and jet fuel will become tighter.
Under the circumstances, that may simply be the price of survival.
Korea’s refining system presents an interesting case.
It is one of the largest refining hubs in the world, but its scale was never built around domestic consumption.
During the 1980s, the Korean government invited global oil companies to build refineries in the country.
Domestic firms moved quickly, constructing extremely large facilities before foreign players could enter the market — effectively crowding out external investment.
The result is a system capable of dialling back throughput if necessary, particularly as Korea already runs a heavy diet of WTI crude.
Some of this supply will be shipped using Korean-owned tonnage, while Chevron will continue supplying additional barrels, as has been the status quo for years.
As with Japan, Korea should remain comfortable on gasoline and naphtha.
Diesel and jet fuel, however, will tighten considerably.
Korea normally runs a very robust export market for middle distillates.
Those exports will now disappear.
Bangladesh typically runs one Murban cargo per month, a light sour crude.
The most obvious replacement is CPC crude from the Black Sea, likely supplied via Chevron.
However, the logistics will change.
Instead of the usual 1-million-barrel Suezmax cargo, Bangladesh may find itself receiving 700kb Aframax parcels from the Black Sea.
Myanmar is particularly exposed.
The country relies almost entirely on refined product imports, despite the existence of the Chinese pipeline into Kyaukpyu.
Given the current economic fragility and elevated fuel prices, this could easily become a political powder keg.
If energy shortages intensify, the country could see looting and civil unrest.
Myanmar may well become the litmus test for how fragile parts of the emerging world really are.
Signs of instability could appear as early as next month.
Pakistan has already experimented with WTI imports, meaning the refining system at least understands the worst-case yield implications.
That experience may now prove useful.
The Philippines is more exposed.
Its refining system is accustomed almost exclusively to Arabian Gulf medium sour crude.
Refinery operators will need to rapidly adjust their processing configurations if feedstock sources change.
Thailand is far more flexible.
The country has long been familiar with WTI imports, supported by Exxon’s presence in the market.
Thai companies also demonstrate significant global agility.
PTT routinely sources barrels from WTI, Ghana and Argentina, while Bangchak recently secured Libyan crude supply.
Thailand’s refiners already have their antennae up.
Trump has once again played the role of arsonist and fireman simultaneously.
He creates the problem and then presents himself as the hero offering the solution.
Anyone familiar with gaslighting will recognise the tactic.
The challenge is not just crude quality.
Many currencies are depreciating against the US dollar, which changes the economics of crude selection entirely.
Countries may increasingly look for light sweet crudes from economies with weaker currencies, where the currency depreciation offsets the dollar-denominated price.
The most obvious example is Vaca Muerta crude from Argentina, where the Argentinian peso continues to weaken rapidly.
There is one final factor that dwarfs everything else.
Whenever a safe passage announcement through the Strait of Hormuz eventually comes, the market will likely move violently.
Prices could collapse from $120 per barrel to $80 almost overnight.
The bigger issue, however, lies in derivatives markets.
An enormous volume of call and put options has likely accumulated around this single geopolitical event.
The resulting open interest could amplify volatility dramatically.
Our collective addiction to derivatives is becoming dangerous.
And if such a shock occurs, the consequences will fall hardest on the poorest parts of the emerging world — particularly East Africa and Southeast Asia.
