Vuth Dara, a small business owner in Cambodia, has cut his workforce by half and stopped his children's English classes due to rising fuel costs. After the US strikes on Iran in February, gasoline prices in Cambodia surged over 40%. This has slashed demand for the ice he sells, forcing him to switch from an electric stove to charcoal. His daily sales dropped from 50 to 20 bags. With a $20,000 bank loan, Dara fears another crisis could cost him his home and business. He now faces difficult choices to protect his family. His story reflects a growing crisis in Asia as energy costs rise.
A Bloomberg Economics analysis using NASA satellite data shows that 54% of Asian land area experienced reduced nighttime brightness since the conflict began. This dimming is most severe in rural areas, indicating that poorer communities are hit hardest by energy shortages. The hardest-hit nation is Bangladesh, where 70% of its land area dimmed by May compared to the previous year. Other affected countries include Myanmar, Pakistan, China, India, and Cambodia. This data highlights how rising energy prices disproportionately affect areas with weaker infrastructure and fewer economic cushions.
Impact on Rural Energy Use
The Asian Development Bank reported that 60% of the region’s land area dimmed during the conflict's early phase. This decline underscores the challenge rural areas face compared to urban centers. Nighttime brightness is a key indicator of economic activity, and its drop suggests that households and businesses are reducing energy use or scaling back operations. This pattern is particularly evident in Asia’s most fuel-dependent and impoverished economies, which lack the resilience to cope with sudden price shocks.
The ADB has cut its GDP growth forecast for developing Asia and the Pacific to 4.9% for the year, down from 5.1%. Inflation is now expected to reach 4.3%, as higher fuel costs strain household budgets and business operations. The bank also warned that oil prices could stay elevated for years, remaining well above pre-war levels through 2027. This prolonged period of high energy costs poses a long-term threat to economic stability, particularly in countries that lack alternative energy sources or diversified energy strategies.
The International Energy Agency estimates that Southeast Asia’s energy import bill will nearly double this year to about $160 billion. Countries are paying significantly more for fuel than before the conflict began. This financial burden is forcing governments to seek new energy partnerships, even with countries that might otherwise be geopolitical rivals. The Iran conflict was a central topic at a recent meeting of Southeast Asian nations in Manila, with energy security dominating discussions in most sessions.
Seeking Energy Diversification
To diversify energy sources, some Southeast Asian countries are turning to Russia and China. met with Vladimir Putin in June to discuss energy security at a summit in Kazan. Indonesia and Thailand are also pursuing closer energy ties with Moscow. In Cambodia, a nearly $1 billion Chinese-backed hydropower project recently began construction in Phnom Penh. Neighboring Laos is expanding its electricity connections with Beijing. These moves reflect a growing trend where energy needs are pushing nations to strengthen long-term ties with energy-rich partners.
The rising fuel costs are having a severe impact on energy-intensive sectors like tourism and transportation, especially in rural areas with weaker infrastructure. As energy prices remain high, households and businesses in these regions struggle to absorb the costs. Cambodia’s Minister of Mines and Energy, Keo Rottanak, emphasized the need to maintain industrial operations during the crisis. The country is working to keep factory processes running, even as it seeks new ways to secure energy. The new hydropower project in Cambodia is part of a broader strategy to achieve long-term energy security and reduce dependence on volatile global markets.
Threat to Global Energy Supplies
The on-again-off-again conflict in the Middle East continues to threaten global energy supplies, particularly through the Strait of Hormuz. Nearly 80% of the oil passing through this strategic waterway is destined for Asian markets. The region’s developing countries rely almost entirely on energy imports, making them highly vulnerable to disruptions. Matteo Lanzafame, director of the ADB’s macroeconomics research division, described the volume of oil removed from global supply as the biggest shock in history. This highlights the urgent need for Asia to build resilience against future energy crises through diversification and long-term planning.
Bloomberg Economics identified the Asian economies most vulnerable to an oil shock based on their reliance on imported fuel and income levels. The analysis tracked changes in nighttime brightness before and during the conflict, adjusting for seasonal patterns. This approach helps isolate the economic impact of energy price shocks. The findings show a clear correlation between energy costs and reduced economic activity, particularly in poorer regions. As the region faces ongoing energy challenges, it becomes increasingly clear that sustainable and diversified energy solutions are essential for long-term stability and growth.