Asia ‘scraping the bottom of the barrel’ as Red Sea oil blockade worsens energy crisis

A Philippines Jeepney driver refuels his vehicle in Manila. The Houthis have blocked a crucial Red Sea shipping route that will cause fresh energy headaches for Asian economies. Photograph: Ted Aljibe/AFP/Getty Images View image in fullscreen A Philippines Jeepney driver refuels his vehicle in Manila. The Houthis have blocked a crucial Red Sea shipping route that will cause fresh energy headaches for Asian economies. Photograph: Ted Aljibe/AFP/Getty Images Analysis Asia ‘scraping the bottom of the barrel’ as Red Sea oil blockade worsens energy crisis Jonathan Yerushalmy The Houthi threat to Saudi oil exports comes as Japan, South Korea and the Philippines are still reeling from the closure of the strait of Hormuz Governments in Asia are scrambling to avoid their second major energy crisis in six months, as another maritime chokepoint in the Middle East faces a violent blockade, leaving only the Suez canal completely open for the free movement of gulf oil. Countries like Japan, the Philippines, Thailand and South Korea – which rely on Middle East oil for up to 90% of their imports – are working to secure supplies after Yemen’s Houthis launched a blockade of Saudi Arabian shipping passing through the Bab al-Mandab strait, which forms the southern entrance to the Red Sea. How the Bab al-Mandab blockade threat helped push oil back above $100 Read more Many countries in Asia are still reeling from Iran’s effective closure of the strait of Hormuz in March, which forced governments across the region to compete for increasingly dwindling supplies of Middle Eastern crude oil. “They’re scraping at the bottom of the barrel in terms of global reserve capacity … there’s very little inventory now,” says Ahmed Helal, from the Asia Group thinktank. Japan – along with neighbouring countries – is already spending billions on fuel subsidies to keep the cost of petroleum down, hitting government budgets hard. ⁠After the announcement from the Houthis, some like South Korea were quick to extend those fuel ​tax cuts. Meanwhile, the spike in the cost of imports has led to a rise in inflation, piling pressure on the governments of regional giants such as Japan and Indonesia. Now, the threat to Red Sea shipping is set to increase the pressure. In March, Saudi Arabia responded to the closure of the strait of Hormuz by rerouting oil exports from the gulf on the country’s east coast, to the west coast port of Yanbu in the Red Sea which now handles more than 70% of Riyadh’s crude oil exports. Map of the gulf. That proved to be a lifeline for many Asian nations, like China – which is the largest buyer of Saudi oil – and India, Japan and South Korea , which follow close behind. Some Japanese and South Korean refiners are reportedly seeking to circumvent the Houthi threat by rerouting cargos north through the Suez canal, to the Mediterranean and around Africa. But this lengthy detour comes with huge costs. A VLCC, the largest size of oil tanker, is too big to pass through the Su