From skies to supply chains – Asia’s exposure to refined fuel shocks

Pockets of extreme tightness in refined fuel supply are a severe constraint on Asia’s growth outlook, including jet fuel, marine fuel, and petrochemical feedstocks. That will weigh heavily on Asia’s key trade and transport nodes.

• Jet fuel shortages are constraining aviation capacity across Asia, with cuts concentrated in short-haul routes as airlines prioritise higher-yield long-haul services. Tourism-dependent economies are most exposed, and regional aviation hubs could see reduced transit volumes and related services activity.
• Constraints on the availability of marine and aviation fuel are tightening transport capacity, raising freight costs, and prolonging supply chain frictions across Asia’s trade-dependent economies. These logistics pressures are likely to reinforce core goods inflation and food price pressures.
• Feedstock constraints affecting intermediates may create bottlenecks across Asia’s manufacturing supply chains. Although refining hubs will benefit from improved margins, downstream manufacturing exporters remain more exposed to production disruptions.
• Together, these suggest non-linear increases in imported inflation across regional economies from benchmark energy prices alone. Fiscal policies are likely to provide a partial buffer against escalating costs, but cannot solve dislocations driven by the availability of fuel.

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