This is how the world reacts to the shock on the oil market. Europe and Asia use different methods
As noted by Daniel Kostecki, chief market analyst of the Polish branch of CMC Markets, strategies vary significantly depending on the region. Asia resorts to administrative regulations and restrictions, while Europe focuses on fiscal and protective measures.
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According to the International Energy Agency (IEA), referred to by Kostecki, the conflict in the Middle East eliminated over 12 million barrels of oil per day from the market.
“This is the biggest supply shock in history, surpassing the oil crises of the 1970s and the cut off of Russian gas in 2022,” the analyst noted.
In his opinion, the current situation forces governments to introduce administrative demand management mechanisms.
Asia introduces restrictions on everyday life
The most radical steps were taken in Asia, where governments interfere not only in prices but also in the everyday lives of citizens.
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Sri Lanka has introduced a fuel rationing system based on QR codes, vehicle limits, as well as closing schools and universities on Wednesdays and limiting street lighting after 9 p.m.
Pakistan shortened the public sector working week to four days, temporarily closed schools and lowered speed limits on highways.
Burma implemented alternating driving days for vehicles and fuel rationing.
The Philippines has declared an energy crisis, offering free bus transport for some passengers and subsidies for farmers, fishermen and the transport industry.
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Bangladesh, Thailand, Vietnam and Indonesia have introduced restrictions on air conditioning, including temperature limits, and reduced the number of business trips for officials.
Europe: fiscal protective shields
In Europe, government actions focus on mitigating price shocks through fiscal and protective measures.
— Governments are first trying to cushion price increases before they decide on more drastic reductions in demand, Kostecki noted.
The most frequently used solutions are reductions in VAT, excise duty and other fuel taxes, which is particularly visible on the Old Continent.
Some countries including Poland, Croatia, Greece, Hungary and Serbia, have introduced price or margin limits. In turn, France, Ireland and Great Britain have opted for protective shields for transport and households that are particularly sensitive to price increases.
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“The European response is more like an anti-inflation shield than full rationing,” said the analyst.
Future prospects
Kostecki noted that, according to IEA experts, supply losses in April will be twice as high as in March. Even a quick end to the conflict in the Middle East will not solve the problemas it may take many months to rebuild infrastructure and transit.
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“The world has divided into countries that try to limit consumption and those that prefer to maintain demand by administratively suppressing prices” – concluded the analyst.
