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In 2021, spot LNG trades led the global commodity price surge,
and the tight conditions of the global energy market have been
exacerbated by the Russia-Ukraine war.
Spot LNG is currently a small proportion of Southeast Asian gas
mix, but the crisis has grown. Oil prices, which were a laggard
throughout most of 2021, have now caught up as risks around Russian
oil exports propel prices well beyond $100/bbl. The surge in oil
price is increasing the price of oil-indexed gas—the typical
gas contract in Southeast Asia—and that hurts affordability
even in markets with minimal exposure to spot LNG. Most markets in
the region have distinct structure, and as a result each market has
responded differently.
Many of the current measures in Southeast Asia were done in
response to the energy market dynamics in the second half of 2021
and yet to incorporate the impact of the Russia-Ukraine war. In the
near term, a persistent high energy price environment would test
governments' ability to limit the impact on consumer prices to
avoid derailing the economic recovery.
The long-term trend toward sustainability and liberalization is
still on the agenda. However, should prices stay high over the next
two years, governments may be forced to reassess the situation,
moving back to cheaper power options, reverting to market
consolidation and increasing government intervention.
