Fuel Price Increases Affect Southeast Asia Amidst Middle East Conflict

Fuel Price Surge Grips Southeast Asia, Intensifying Economic Strain

Fuel prices have risen significantly in Southeast Asia, impacting vulnerable populations and creating economic challenges across the region. This surge is attributed to the conflict in the Middle East. The increases have led to higher daily expenses for transportation workers and food sellers, compounding existing economic hardships for many residents, and prompting various government responses.

Regional Economic Overview: Vulnerability Intensifies

The fuel price increases present economic challenges for some of Southeast Asia's lower-income residents. A 2022 study in the Journal of Economics and Development Studies indicates that approximately 120 million of the region's nearly 700 million people live below the poverty line.

The World Food Programme estimates that the current crisis could push an additional 9 million people into acute food insecurity across broader Asia, a region that consumes 80% of the oil transiting the Strait of Hormuz.

Analysts from Singapore's ISEAS-Yusof Ishak Institute note that less developed nations, including Cambodia, Laos, Myanmar, and Timor-Leste, are particularly vulnerable. This vulnerability stems from their reliance on fuel imports and limited resources to mitigate economic shocks. Increased overall price levels tend to disproportionately affect lower-income individuals, and countries with limited resources often have lower fuel reserves.

Cambodia Bears the Brunt: Daily Life Disrupted

In Phnom Penh, Cambodia, the price of LPG (liquefied petroleum gas) for tuktuks has doubled, exceeding $1.50 per liter. Regular 92-octane fuel for other vehicles has also risen to approximately $2 per liter. Tuktuk drivers, such as Hun Borin, report that daily earnings are largely spent on fuel, leaving minimal income for their families.

Tuktuk drivers state that government efforts to cut fuel taxes have not provided noticeable relief.

Some drivers have expressed frustration with app companies and the ministry regarding these economic pressures. Ride-hailing companies for tuktuks have increased fares by approximately 7 cents per kilometer to help offset driver costs. However, drivers report that this has led to customer complaints and, in some instances, a risk of being blocked from the app for minor fare differences.

The impact extends to food vendors in Phnom Penh. Heng Sokchea, a pork seller, reported that her suppliers have raised prices due to increased transport costs. She is hesitant to pass these increases on to regular customers, affecting her profit margins. Um Pov, a vegetable seller, stated her daily income has decreased to about $4 despite working extended hours.

In Trapeang Khnar village, located approximately 70 kilometers south of Phnom Penh, rice growers are experiencing increased ploughing costs, which have risen by about 30% due to higher diesel prices. Village chief Hou Sophal reported that families have reduced food consumption and are considering reverting to charcoal and wood for cooking to save money. He also noted that many families carry debt to banks, which constitutes a significant portion of their wages.

Sophal raised concerns that high fuel costs could lead to factory closures, potentially increasing unemployment among the younger generation who work for global brands.

The village comprises 132 rice-growing families.

Government Responses and Regional Supply Dynamics

Governments in the region are evaluating responses to the rising fuel prices, balancing the need for relief with national budget constraints.

Thailand removed its cap on diesel prices, allowing them to fluctuate with market rates.
The Philippines declared a national emergency and sought oil from Russia.

Cambodia, which imports all its fuel, has faced supply challenges. Thailand ceased fuel trade with Cambodia in July due to a conflict, and Vietnam has prioritized its domestic supply. Modest relief has come from fuel shipments from Singapore and Malaysia.

Historically, Vietnam and Thailand supplied over half of Cambodia's fuel, highlighting the severity of current supply disruptions.