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Coronavirus means cheap oil isn’t good news for energy-hungry Southeast Asia
- With demand at an all-time low, things look dire for Indonesia, Malaysia, Vietnam, Thailand and Brunei, whose state revenues rely on oil and gas projects
- Meanwhile, Singapore’s struggling offshore and marine sector will be further squeezed
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Oil prices are at the cheapest they have ever been in modern history, but this does not bode well even for Southeast Asia’s energy-hungry economies.
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In fact, compounded with the rising pressures of the coronavirus pandemic, the new lows seen in global oil prices are likely to hurt government coffers, spark a wave of bankruptcies, and unleash a fresh round of retrenchments across the region, industry observers say.
Oil-producing countries like Indonesia and Malaysia are likely to take a big hit, while Singapore’s offshore and marine sector, which barely scraped through the last market rout when oil prices crashed in 2014, will be squeezed further.
The oil and gas industry is no stranger to volatility. But with the Covid-19 outbreak in tow, things are different this time, says Tan Lian Yok, a Singapore-based partner at international law firm K&L Gates Straits Law.
“What’s different is that business is not as normal. You have all that oil either in the ground or in storage but it’s stuck, because no one is consuming it,” Tan said. “That’s going to be a big problem.”
DOUBLE WHAMMY
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Backed by a growing population and rapid urbanisation, Southeast Asia is a region with a big appetite for energy, most of which is powered by fossil fuels.
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