While the current oil crisis stemming from the war in the Middle East has disproportionately affected Asia, it does not mean that the rest of the world is untouched by it.
Even the United States, which started the war together with Israel when the two nations began bombing Iran on February 28, has been affected by the conflict.
Aside from pump prices going up by around 35%, the US’s exposure to the war may come in the form of a lack of supplies, especially if the war ends up being a long-lasting one.
Fuel shock in Asia
Asia was the first to be affected by the conflict due to the effective closure of the Strait of Hormuz, an important chokepoint for around 20% of the world’s supply of fuel.
Because Asia is heavily reliant on energy from the Middle East, governments have been grappling with soaring oil prices and scrambling to ensure enough supply for domestic use.
Additionally, a disruption to a whole range of manufacturing in Asia is expected, with the region finding itself in short supply of plastics, rubber, and aluminium.
A significant portion of two of the most-used plastics across the globe, polypropylene and polyethylene, is shipped from the Middle East, as well as 15% of fertiliser and 25% of sulfur used around the world.
A recent report in CNN noted that a number of key petrochemical producers have declared “force majeure,” which means they will not be able to make good on their deliverables to clients. Among these producers are PCS in Singapore and Yeochun in South Korea.
Another example is the Malaysia-based company Karex, which produces the latex condoms ONE, Trustex, Carex, and Pasante. Last week, CEO Goh Miah Kiat told Reuters that prices would be raised by at least 20% to 30% due to supply chain disruptions.
CNN quoted investment strategist Ross Mayfield as saying that the US is “more exposed than we realise.”
The report pointed out that while the US received its most recent shipments of energy products from the Middle East shortly before the war, it may take a while before a shortage is felt. Stephen Brown, chief North American economist at Capital Economics, said that it may be three months before plastic shortages would spread across the globe, and four months before car manufacturers would have to limit production due to the disruption to the supply of aluminium.
Asia is a core manufacturing hub for exports to the US, and Reuters reported that Asia is the first transmission point for fuel shocks, not the endpoint. This means that the crisis Asia is feeling keenly will spread to global markets. Through rising prices, trade flows, and supply chains, the US will feel Asia’s pain sooner or later. /TISG
Read related: Japan offers Southeast Asian nations S$12.7 billion to help with oil shock
This article (How Asia’s widespread fuel shock will also affect the US) first appeared on The Independent Singapore News.
