Resilience amidst oil volatility: Implications for Southeast Asia’s energy security

Decisions will go beyond whether to hold more inventory, but also how to segregate inventories. 

Over the past two decades, global oil markets have been rocked by a series of high-amplitude shocks – and with increasing frequency in recent years. The latest conflict in the Gulf has sent another jolt to oil prices and supply chains.

Parts of Southeast Asia source as much as 70% of their crude oil and 100% of their gas from the Middle East. Supply shocks not only carry immediate impacts on Southeast Asian energy and petrochemical companies’ balance sheets, but they also pose longer-term questions for their competitiveness, in addition to national energy security and affordability.

Ripple effects to add fuel to the fire 
The first consequence of the Gulf crisis has been export curbs and regional supply shortages across Southeast Asia. As Gulf flows tighten, we expect refiners in Southeast Asia to have no choice but to scramble for replacement cargoes from farther afield, paying steep premiums in volatile spot markets, which will exacerbate the disruption.

Compounding this, several countries within the region regulate or subsidise fuels domestically, which means prices cannot immediately be raised to match surging import costs. This will, in turn, shift the burden onto governments in the form of higher subsidy bills.

The region’s petrochemical sector faces an equally acute challenge. With vital naphtha input flowing through Hormuz choked off, many cracker plants have responded by cutting production rates, reshuffling feedstocks, or even declaring force majeure on customer orders in some cases.

Furthermore, highly import-dependent refiners and petrochemical players can expect higher costs of capital and insurance. Flexibility in assets and contracts may also come at a premium. Firms can expect greater scrutiny from the respective governments as nations relook at their national reserve and stockpile policies.

With war-driven uncertainties adding yet another input to their strategic assumptions, firms may also make extraordinary measures to realign their investment portfolios.

Key questions for Southeast Asia’s energy firms 
In storms like these, the most serious impacts will not come from getting the wrong answers, but from asking the wrong questions. We identify five strategic questions, spanning from immediate measures to safeguard business continuity and cash management, to longer-term structural changes.

Do we have robust market and supply chain sensing capabilities?
In today’s digital age, misinformation leads to delayed or uncertain decision-making – which can be critical especially when the longevity of the war in the Gulf remains unclear. Therefore, organisations should relook at their current market intelligence mechanisms and formalise robust techniques to channel information to executive decision-makers. This should take the form of a “supply chain tower” that integrates price, freight, inventory, and disruption indicators together for leaders to gain a clearer picture of cargo nominations, arbitrage, and run cuts.

Is our operating model robust enough in times of uncertainty?
To deal with frequent shocks, players need more dynamic hedging strategies, flexible pricing formulas, and the ability to reopen terms in extraordinary circumstances. According to Deloitte’s 2026 Oil and Gas Industry Outlook, artificial intelligence and digital twins are modernising contract life cycle management, providing agility that can protect companies from the worst cash-flow hits when markets gyrate.

In practice, this requires tight coordination across functions, including trading, treasury, tax, shipping, terminals, and storage and commercial teams. Hedging decisions cannot sit in isolation from physical trading or logistics constraints; similarly, commercial teams cannot reprice contracts effectively if they lack real‑time visibility into inventory, counterparty exposure, or working capital capacity.

Do we need to revisit our physical supply chains going forward? 
Supply chain resilience goes beyond simply switching suppliers on a spreadsheet. For crude and naphtha, this can mean building long-term relationships and term contracts with non-Gulf counterparties, investing in blending and compatibility capabilities to handle a wider range of crude qualities, and, where feasible, taking minority stakes or offtake-linked investments in upstream or midstream assets to secure flow priority.

This will also include re-thinking shipping and tanker exposure to take the reins on alternative routes and storage considerations. Decisions will go beyond whether to hold more inventory, but also how to segregate inventories across business segments, optimise inventory costs against strategic risks, and explore shared or third-party storage arrangements in less vulnerable hubs.

Governments’ own strategic reserve policies will influence private storage strategies and should be considered.

Is there a stronger business case for sustainability?
The volatility in oil markets has brought a renewed focus on the green energy transition, from a lens of resilience. After all, more renewable energy installations mean less reliance on fossil fuel imports. ASEAN’s new target of 45% renewables in its installed power capacity by 2030, up from 35% by 2025, already signals a commitment in this direction.

This moment also strengthens the business case for recycling. In polymers, for instance, every ton of high-quality recycled polyethylene terephthalate (rPET) displaces virgin PET and therefore part of its embedded oil and naphtha exposure. As oil prices spike, the cost premium of rPET over virgin PET typically narrows, making long-term offtake contracts and investments in collection and sorting infrastructure more attractive.

Energy and petrochemical leaders should therefore re-examine the cost calculus to sustainability, since the conventional wisdom that “green costs more” may not hold up.

How can we tap intra-ASEAN cooperation?
Systemic vulnerabilities cannot be addressed by one company or country alone. The scale of supply-chain shocks like a Hormuz Strait closure should create the business case for ASEAN nations to strengthen collective energy security schemes to address systemic vulnerabilities.

The joint decision amongst all 32 member countries of the International Energy Agency to make 400 million barrels of oil from their emergency reserves available to the market is a good case study. ASEAN can also consider similar stockpiles: Some member countries (Brunei, Malaysia) are net exporters, who could contribute significantly to this initiative. Private-public partnerships may also play an important role, possibly in the form of joint stockpiling, coordinated emergency response mechanisms, or shared infrastructure investments.

Resilience at the core of strategy
Business structures depend on the world order, which had until recently been taken for granted. The recent state of global events has now created fault lines and challenged long-held assumptions.

The turmoil in oil markets today is a glimpse of a new operating climate defined by frequent disruption. For energy and petrochemical companies in Southeast Asia, extreme volatility and supply uncertainty must be assumed as baseline business conditions going forward.

Beyond immediate action in response to geopolitical shocks, energy industry leaders must think deeper about fundamental shifts, ask the right questions, and rethink their business structures to put resilience at the core.