The war in the Gulf has hit Asian economies hard. The shock to global energy supplies is driving up fuel prices, threatening energy shortages and has the potential to cause economic stagnation and inflation. In response, governments across the region have been implementing emergency policy measures to shield their citizens from rising prices and job losses and to maintain economic growth.

Vietnam has temporarily suspended some fuel taxes, while the Philippines has declared a state of national energy emergency and is subsidising transport drivers. Indonesia is allocating more funds from its budget to fuel subsidies to prevent prices from rising, funded by cuts in departmental budgets.

Malaysia has kept the price of subsidised petrol unchanged but cut the volume of subsidised fuel allowed for each customer by a third, given the rising budgetary costs of fuel subsidies. Some countries in Asia plan to generate more power from their coal-fired plants.

In the short term, energy subsidies can provide temporary relief. However, in the long term, the global fuel supply shock should focus attention on the urgent need to accelerate the transition out of fossil fuels and into clean energy.

This entails investing in renewable energy – wind, solar and hydropower – to meet the rapidly growing demand for electricity in the region and to replace existing fossil fuel power plants as they become obsolete or financially unviable. Asian economies should also electrify transport and industry where feasible.

This transition is already gathering pace. For example, countries in Southeast Asia increased investment in renewable energy from US$30 billion in 2015 to US$47 billion in 2025. Investment in fossil fuel generation fell by US$20 billion in the same period.