Soaring natural gas prices and supply disruptions linked to the Strait of Hormuz closure are driving a sharp increase in fuel oil consumption for power generation across Asia and the Middle East, as utilities scramble to keep lights on amid the worst energy crisis in decades. Countries from Pakistan and Bangladesh to the Philippines and Egypt are turning to fuel oil-fired power plants to replace lost gas-fired generation, tightening an already strained residual fuel market.
The IEA's April 2026 Oil Market Report documented the shift directly: "Countries like Pakistan and Bangladesh, which normally import LNG from the Gulf, may be able to burn more fuel oil" in power plants to compensate for reduced gas availability. While global fuel oil demand (overwhelmingly bunkering-related) fell below 1 million bpd for the first time in 2026 to 970,000 bpd, it was still up 50,000 bpd year-on-year, or roughly 6%. That increase is being driven almost entirely by power generation burn in price-sensitive emerging economies that can no longer afford LNG cargoes after spot prices surged more than 140% since the conflict began.
"At the regional level, importing oil and gas at current prices is adding $3.36 billion per month to ASEAN's import bill, a 3.4% increase above 2026 budget expectations," the World Economic Forum noted in a May 6 analysis. The Philippines and Thailand have seen fuel price spikes translate directly into higher electricity costs, with power outages, production slowdowns, and household income squeezes following within weeks.
Pakistan, which relies on fuel oil for approximately 35% of its power generation capacity, has emerged as a major swing buyer. With LNG spot prices nearly tripling since the Hormuz closure — and Qatar's liquefaction infrastructure damaged in the conflict — Pakistan's state-owned utilities have ramped up fuel oil procurement to maximum levels. Prime Minister Shehbaz Sharif announced emergency austerity measures including a four-day work week for public offices, two-week school closures, and a 50% reduction in government fuel allowances, according to Forbes. Similar dynamics are playing out in Bangladesh, where fuel oil imports rose an estimated 18% month-on-month in April according to shipbroker and customs data reviewed by Reuters, and universities have been closed to reduce electricity consumption.
In the Middle East itself, the irony is stark: several Gulf Cooperation Council states that were net exporters of refined products before the war are now burning fuel oil domestically to meet summer peak power demand. Saudi Arabia and Kuwait, which typically use crude oil directly for power generation during the hot summer months, have been drawing on fuel oil stocks as crude output has been disrupted. Kuwait's fuel oil consumption for power generation rose to approximately 120,000 bpd in April, up from a seasonal average of 85,000 bpd, according to S&P Global Platts estimates.
Egypt, a major fuel oil consumer in North Africa, has also increased its fuel oil burn for power generation after suffering severe reductions in LNG imports that typically transit the Suez Canal from Qatar and other Gulf producers. The IEA noted that Egypt likely used more fuel oil in power plants while gas flows from Israel's Leviathan field were interrupted during the conflict. The country's fuel oil demand for power generation reached an estimated 95,000 bpd in April, up roughly 20% year-on-year.
India has directed coal plants to operate at maximum capacity and is diversifying crude import sources from roughly 20 countries to 40 by end of March 2026, according to IEEFA. However, fuel oil serves a critical swing role in the broader Asian "energy triage" — it can be stored relatively easily and burned in dual-fired power plants without major retrofits. Announced government demand-saving measures in several South and Southeast Asian oil-importing countries are estimated by the IEA to have the potential to save up to 400 kb/d of oil products, but these savings are being partially offset by increased fuel oil burn for power generation.
The crisis risks derailing progress on energy access. Around 3.4 billion people across the developing world rely on fuels like LPG for cooking, and the diversion of refinery output toward power generation and bunker markets is compounding supply tightness for residential consumers. India's LPG imports dropped by more than half over the first two months of the conflict, with long queues reported for cooking gas cylinders. Looking ahead, the peak summer cooling season in South Asia and the Middle East — typically June through September — will test the limits of fuel oil supply chains, with power generation demand expected to remain elevated for the foreseeable future.