At the cheapest fuel station in Phnom Penh, the queue of tuktuk drivers stretches back for an hour. For those operating these three-wheeled, low-fi people-movers, the wait is not just an inconvenience; it is a desperate attempt to keep their livelihoods from evaporating. As the high price of petrol takes its toll in South-East Asia, the financial strain has moved beyond a mere cost-of-living adjustment and into the realm of a humanitarian calamity.
In Cambodia, LPG (liquefied petroleum gas) prices have doubled, exceeding $1.50 per litre. Regular “92” fuel for motorbikes and cars has climbed to approximately $2 per litre—a sum that, for many, represents a significant portion of a daily meal. Even as the Cambodian government has attempted to mitigate the shock by cutting various fuel taxes, the relief is largely invisible to those on the ground. For drivers like Hun Borin, the primary provider for his wife, two children, and mother, the crisis is measured in meat. His family has been forced to cut their daily consumption of protein by half.
The catalyst for this regional shock is the de facto closure of the Strait of Hormuz, a critical maritime artery through which roughly 20 per cent of the world’s oil and liquefied natural gas (LNG) typically passes. For the poorest inhabitants of South-East Asia, the disruption of this single transit channel has triggered a cascade of economic failures, from the urban centers of Vientiane to the rural rice paddies of Cambodia.
The ‘Tax on the Poor’: A Macroeconomic Crisis
The current fuel shock is not felt equally across the population. While higher prices are a nuisance in wealthier nations, they act as a regressive tax in the ASEAN bloc. According to a 2022 paper in the Journal of Economics and Development Studies, approximately 120 million of the region’s nearly 700 million people already live below the poverty line.
Dr. Jayant Menon of Singapore’s ISEAS-Yusof Ishak Institute explains that the impact is magnified in less developed economies. “At the macro level, the increase in the overall price level hits the poor harder than others. What we have is what is meant by the statement ‘inflation is mainly a tax on the poor,’” Menon says. He further notes that poor countries, hampered by limited fiscal resources, maintain lower fuel reserves, meaning that when supply chains break, the local stocks run out faster.
The human cost is already manifesting as acute hunger. The World Food Programme estimates that the current energy crisis could push an additional 9 million people across broader Asia into acute food insecurity, as transport costs drive up the price of staples.
Regional Instability and Supply Bottlenecks
Governments across South-East Asia are currently trapped between two unsustainable options: increasing subsidies to protect the poor or allowing national budgets to collapse under the weight of fuel costs.
| Country | Action Taken | Current Status |
|---|---|---|
| Thailand | Removed diesel price cap | Pump prices now floating |
| Philippines | Declared national emergency | Sourcing oil from Russia |
| Cambodia | Reduced fuel taxes | Supplies shifting to Singapore/Malaysia |
| Laos | Limited reserve capacity | Multiple station closures reported |
The crisis is compounded by geopolitical friction. Cambodia, which imports all of its fuel, traditionally relied on Thailand and Vietnam for more than half of its supply. Though, trade with Thailand ceased following the onset of conflict between the two nations in July. Simultaneously, Vietnam has restricted exports to prioritize its own struggling population. While modest relief has arrived via shipments from Singapore and Malaysia, the supply remains fragile.
In neighboring Laos, the situation is similarly dire. In the capital, Vientiane, regular fuel prices have surged beyond $US2.50 per litre—nearly double the pre-war average. Reports indicate that at one point last month, two out of every five petrol stations in the country were forced to close their doors.
From Rice Paddies to Garment Factories
The ripple effects of the high price of petrol takes its toll in South-East Asia are most evident in the rural economy. In Trapeang Khnar village, located 70 kilometers south of Phnom Penh, the cost of diesel has driven ploughing expenses up by roughly 30 per cent. This increase threatens the production of jasmine rice, a key export for the region.
Village chief Hou Sophal reports that families are now contemplating a return to charcoal and wood for cooking, defying the government’s smoke-free village policy. “Every family is facing extreme hardship,” Sophal says. He highlights a dangerous cycle of debt, noting that many villagers must pay bank loans immediately upon receiving wages, leaving almost nothing for food or fuel.
This economic contagion has reached the industrial sector as well. In factories producing high-end apparel for global brands—such as Helly Hansen jackets that retail in Australia for up to $950—workers are struggling to afford the commute. Sambath Sakphea, a 20-year-old machine sewer earning $US208 a month, receives a government fuel subsidy of $US2.50 per month. He describes this amount as insufficient, stating, “I’m running low on money.”
The Path Forward: Baseline vs. Worst-Case
Economists remain divided on whether this shock will lead to a prolonged depression. Dr. Han Phoumin of the Economic Research Institute for ASEAN and East Asia suggests that a lengthy recession is not currently the baseline scenario. In the best-case outcome, he suggests, the disruption to supply routes will be temporary, and oil prices will stabilize, resulting in manageable fiscal impacts.
However, a darker alternative exists. “In the worst-case scenario, prolonged disruption to supply routes such as the Strait of Hormuz could sustain high oil and gas prices, leading to stronger inflation, fiscal strain from subsidies, weaker currencies and slower growth,” Phoumin warns.
For the tuktuk drivers in Phnom Penh and the restaurant owners in Vientiane, the macroeconomic theories matter less than the daily struggle for solvency. As they wait in line for a few litres of LPG, they are not watching global markets; they are watching their savings disappear.
The next critical checkpoint for the region will be the upcoming review of ASEAN energy security protocols, where member states are expected to discuss coordinated strategic reserves to prevent future total reliance on the Strait of Hormuz.
Do you think global powers are doing enough to stabilize energy prices for developing nations? Share your thoughts in the comments below.
