Asia, the world’s largest oil-importing region, has been uniquely affected by the collapse of oil prices over the last two years. Low prices have been a mixed blessing for the region, carrying significant risk for the future. For example, low prices have stimulated oil demand but not economic growth, with the notable exception of India. The price decline has also slashed investment in future oil-production capacity and increased Asia’s dependence on exports from the Middle East at a time of rising political risk in that region.
In a special report on Asia’s energy security amid global market change, published by the National Bureau of Asian Research, CGEP program director Antoine Halff examines the short and longer term impacts of low oil prices on Asian countries and the risks to energy security. Key policy implications from the article include:
- Asian countries should develop strategic petroleum reserves (SPR) now to offer a cushion in the event of a disruption. However, to manage associated risks, SPR policies must become more transparent and better coordinated, whether through the International Energy Agency (IEA) or ad hoc channels.
- Asian countries should aggressively pursue domestic reforms to enhance the liquidity, transparency, and competitiveness of their domestic oil markets and reduce the oil intensity of their economies. Simultaneously, they should step up investment in renewable energy, clean-tech infrastructure, and efficiency programs.
- Asia’s emerging economies should assume greater leadership in reforming and remodeling existing institutions, such as the IEA and International Energy Forum, to increase their participation or by designing new institutions to better articulate their vision for global energy governance.