Iran tensions lift LNG 77%, expose Asia fuel risks: report

IEEFA says renewables offer a lasting hedge.

Rising oil and liquefied natural gas prices since late February have exposed how vulnerable Asia’s fossil fuel importers remain to geopolitical shocks, with LNG up 77% and crude oil up 51% between 27 February and 9 March, according to the Institute for Energy Economics and Financial Analysis.

The group said the conflict around Iran risks spilling into inflation, interest rates, trade balances, and economic growth across the region, even where countries are not directly dependent on Middle East supplies.

More than 80% of crude oil and LNG leaving the Strait of Hormuz is destined for Asia, whilst Asia’s LNG benchmark, the Japan-Korea Marker, rose 50% over the same period.

The report said the pressure is likely to be heaviest on emerging Asian economies that rely on imported fuels but have weaker buffers against price shocks.

It pointed to examples from the 2022 energy crisis, when annual LNG spending in Pakistan and Bangladesh more than doubled despite lower demand, whilst Japan’s LNG spending rose 65% even as consumption fell.

IEEFA said the fallout extends beyond import bills, warning that currency weakness, higher borrowing costs, and subsidy measures can strain public finances and corporate balance sheets.

It cited South Korea’s KEPCO, which posted a $24.4b operating loss in 2022 as fuel costs surged, and said the Philippines’ San Miguel Global Power sold 67% of its LNG assets in 2024 after a liquidity crunch tied to fossil fuel price exposure.

The report said renewables offer the only durable way to reduce that vulnerability because they cut dependence on volatile imported fuels rather than simply cushioning price spikes.

At current LNG prices, it is estimated that the fuel cost alone of running a 1GW gas-fired plant at baseload would be nearly $800m, with generation costs of about $130 to $140 per megawatt-hour, compared with global average levelised costs of about $40 per megawatt-hour (MWh) for onshore wind and $39 per MWh for solar.

IEEFA estimated that 1GW of solar could displace 160,000 tonnes a year of LNG demand, avoiding about $128m of LNG imports at current prices and more than $3b over a plant’s lifetime.

It said faster renewable deployment would strengthen energy security and improve macroeconomic stability as Asian economies face repeated fossil fuel price shocks.