Energy Crisis in the Philippines and Thailand Shows Risks of LNG and Petroleum Over-reliance

With oil and gas flows from the Middle East still stalled, the situation is dire as the energy crisis in the Philippines and Thailand gets worse.

Philippines Declares National Energy Emergency

Philippine President Ferdinand R. Marcos Jr. has declared a state of emergency due to energy shortages, and across the country, petrol stations are closing due to a lack of fuel. Gas prices are increasing, and electricity prices are surging. In nearby Thailand, the situation is also getting worse, as fuel rationing is being planned and gas-fired power plants are being forced to reduce capacity.

“The current crisis is a clear reminder of the region’s structural exposure to global fuel markets,” said Yanqi Cao, senior analyst for Asia Pacific power and renewable research at Wood Mackenzie. “Energy security is moving back to the top of the agenda, and this will have lasting implications for how power systems evolve in the region.”

Soaring Oil Prices in Southeast Asia after War in the Middle East

Over the past several years, most Southeast Asian leaders have done far too little to transition away from fossil fuels, like natural gas and petroleum, to clean energies, like wind and solar. Now, it’s regular people who are paying the price. With fossil gas and petroleum prices rising rapidly due to the ongoing war in Iran and the blockage of the Strait of Hormuz, it’s those living in countries overly dependent on fossil fuels, like Thailand and the Philippines, who are suffering the most.

Both countries’ governments are partly to blame, as they enabled billions of dollars of new liquefied natural gas (LNG) and fossil fuel infrastructure in recent years, but now can’t access enough oil, gas and coal to fuel existing thermal power plants. The result is the current, preventable crisis — but there is an opportunity to change.

Energy Security at Risk Due to Over-dependence on Fossil Fuels

In the Philippines, over 85% of primary energy comes from oil, gas, and coal, most of which is imported, with oil and gas in particular coming from the Middle East. Wind and solar make up less than 2% of generation, despite the Philippines being one of the countries with the most ample renewable sources.

It’s even worse in Thailand, which depends on fossil fuels for an astounding 96% of energy consumption, with solar and wind only generating 1.5% of the country’s demand.

Both countries have few fossil fuel resources, meaning they are dependent almost entirely on imports. This puts them in a worse situation than both countries in the region with their own resources, like Malaysia and Indonesia, but also other resource-poor countries that are less dependent on fossil fuels, like Vietnam, Japan and Taiwan, due to the expansion of wind and solar.

Rather than reducing dependence, Thailand recently expanded LNG capacity, opening a new terminal in 2022 and growing imports. In the Philippines, even before the crisis, dependence on LNG was growing, and price volatility was costing households billions.

Time To Switch To Renewable Energy

The best time to switch to renewables would have been several years ago, after price spikes during the COVID-19 pandemic and Russia’s invasion of Ukraine, when it was already abundantly clear that reliance on fossil fuels was a risky bet for developing and emerging economies like Thailand and the Philippines. The next best time is now, and while it’s too late to do anything about the current crisis, the long-term benefits are clear.

“Replacing fossils with renewables can save fuel costs. In Thailand’s case, looking at the projections by 2037, expanding solar and battery capacity could further unlock USD 1.8 billion savings from the fuel cost from gas,” said Dinita Setyawati, senior electricity policy analyst at energy think tank Ember.

In the Philippines, onshore and offshore wind could provide a needed buffer and increase energy security, and also allow for economic development across the archipelago.

“The World Bank already identified a lot of wind corridors in the Philippines, putting potential offshore wind capacity at 60 GW all over the country. That would power not only the whole country, we can also become an exporter of power to neighbour ASEAN countries,” said Gaspar Escobar Jr, grid modernisation advisor at the nonprofit Institute for Climate and Sustainable Cities.

For Cao, the longer the crisis goes, the stronger the case for shifting becomes.

“Sustained volatility in global energy markets is likely to sharpen the region’s focus on energy security,” said Cao.

Thai and Philippine residents are paying the price for bad decisions made by governments and businesses to expand reliance on imported fossil fuels. We’ve known for years that clean energy is better for the climate and the environment, and has far fewer adverse social impacts, too. This crisis is showing that renewables are also better for energy security, as they can’t be impacted by conflicts taking place thousands of kilometres away.

Now is the time for leaders in Bangkok and Manila, and across Southeast Asia, to think beyond the present and ensure better energy and economic resilience for the future.