Southeast Asian economies are facing challenges to their fuel price subsidization efforts as elevated crude costs drain national stabilization funds, the Institute for Energy Economics and Financial Analysis said on Thursday.
From Indonesia's new fuel rationing to Vietnam's emergency tax cuts, the report underscores an urgent need to pivot toward clean energy to protect budgets from persistent Middle East volatility, IEEFA noted.
With regional subsidies reaching a staggering $353.1 billion in 2024, governments in Indonesia, Malaysia, Thailand, Vietnam, and the Philippines are now facing intensified fiscal strain as they attempt to insulate domestic markets from price volatility related to US-Iran conflict.
The IEEFA report highlights that reliance on Middle Eastern energy imports has left these economies highly exposed to supply disruptions.
Unlike their Northeast Asian neighbors, most Southeast Asian nations maintain thin strategic buffers, with many holding less than 30 days of supply.
To manage the crisis, Indonesia and Malaysia have implemented strict purchase caps as of April 1, while Vietnam and Thailand have slashed environmental and excise taxes to zero.
In the Philippines, where universal subsidies are not utilized, retail fuel prices have more than doubled since February, forcing the government to deploy targeted cash transfers to the transport and agricultural sectors.
The current price shock has renewed scrutiny of these "politically sensitive" support mechanisms, it said.
IEEFA notes that while governments are scrambling to contain retail prices via stabilization funds, widening deficits caused by these funds are becoming unsustainable.
The report suggests that redirecting these massive resources toward clean energy infrastructure and energy-efficient technologies would not only improve fiscal sustainability but also strengthen long-term energy security across the region.