Southeast Asia faces a potential tripling of its energy import bill to $245 billion by 2035, up from $80 billion in 2024, a cost borne by the region's working class through higher energy bills and rising inflation, according to an International Energy Agency (IEA) report released today. The report warns that the region's overreliance on oil and gas transported through the Strait of Hormuz leaves it vulnerable to shocks from the Iran war, calling it a “stark wake-up call” for energy security. This systemic vulnerability translates directly into increased wealth extraction by fossil fuel interests and a heavier burden on consumers.
Who Pays the Price
The energy shock triggered by the conflict sent Southeast Asia into a state of energy triage, leading directly to higher energy bills and rising inflation for the general populace. In the Philippines, where a national energy emergency was declared, consumers have turned to rooftop solar installations at record rates. Ivan Cano of the Manila-based solar company EcoSolutions noted, “This is the first time I’ve seen a demand shock of this magnitude,” indicating the direct impact of escalating utility costs on households. The Philippines became the second-largest destination for Chinese solar exports in the first quarter of 2026, with imports around three times higher than the same period last year, reflecting a reactive shift in consumer spending.
Consumers have also driven a shift in Southeast Asia’s transportation industry, with electric vehicle sales more than doubling in 2025 to approximately half a million units. The IEA found that one in five cars sold regionally is now electric. Last month, Laos moved to cut oil imports by banning the import of fuel-powered vehicles for the rest of 2026, encouraging the shift to electric vehicles. These individual and state-level adaptations emerge as responses to the systemic failures of a fossil fuel-dependent economy.
Capital's Continued Grip
Despite the clear economic strain on the region, the IEA report indicates a likely setback for efforts to phase out dependence on fossil fuels. The conflict has reinforced the need to rely on coal during times of energy crisis, ensuring the continued profitability of coal extraction and power generation. The war is also furthering plans for nuclear power in Southeast Asia, though yearslong construction and regulatory processes mean timelines for Indonesia, Vietnam, and the Philippines remain uncertain. This suggests capital's long-term investment in centralized energy infrastructure, rather than a rapid transition away from established power structures.
Even with a tentative deal to end the Iran war, fossil fuel prices are expected to remain high, according to Sam Reynolds of the U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA). This sustained high pricing ensures continued surplus extraction for fossil fuel corporations, even as it drives a "push towards more ambitious clean energy deployment" as a means of managing the system's contradictions rather than dismantling them.
The State's Response and Its Limits
Sue-Ern Tan, head of the IEA Regional Cooperation Centre in Singapore, stated that the energy shock is prompting “not just the short-term responses. But a deeper reassessment of policy priorities and investment strategies by governments.” The IEA report recommends that Southeast Asia reduce its overall demand for imported fossil fuels by making national grids more efficient and boosting investment in all forms of renewable energy, such as solar, wind, hydro, and geothermal power. It also suggested prioritizing regional energy sharing initiatives like the Association of Southeast Asian Nations Power Grid.
IEA executive director Fatih Birol emphasized that “Diversification of energy sources and supply routes is now a central priority,” and expressed hope that the “wake-up call from this energy crisis will hopefully help neighboring nations overcome the political barriers that have hindered the project.” These recommendations, while proposing reforms, operate within the existing framework of state-managed capital, aiming to secure energy supply for economic growth rather than fundamentally altering the ownership or control of energy resources. The report concludes that the Middle East conflict is both a “stress test of Southeast Asia’s current energy system and a catalyst to accelerate structural change,” implying an adaptation of the existing system to preserve its foundations, not a challenge to them.