The Association of Southeast Asian Nations has agreed to set up a joint crude oil stockpiling scheme in response to the supply disruption from the war in Iran, which severely affected countries in the region.

The scheme will comprise storage sites in Indonesia and Thailand, Reuters reported today, from which ASEAN members will draw oil in times of tight supply. The withdrawals will be based on a ticket system, under which member countries would pay an advance fee to reserve the right to purchase a certain volume of oil or fuel from storage sites operated by another member country’s energy company. Reuters explained.

The system is pretty much the same as the European Union’s joint stockpiling scheme, the publication noted. The first country to try it would be the Philippines, which has asked to be allowed to buy gasoline and diesel from storage sites in Indonesia and Thailand in case of a supply emergency.

The initiative for joint ASEAN oil stockpiling came from Indonesia and has won the strong support of Japan, which is almost entirely dependent on energy commodity imports and has been especially hard hit by the supply crunch resulting from the U.S. and Israeli war with Iran.

Asia as a whole has been the hardest hit by the fallout of the war that began on February 28. For geographical reasons, the Middle East is the top supplier of hydrocarbons to Asia. With that supplier largely gone for an extended period of time, Asian countries were scrambling to secure alternatives—at higher prices.

This brought inflation and boosted government spending to try and shield the economy from the worst of the fallout. Last month, the World Bank warned that, essentially, Asia was running out of money because of the energy crisis. “Subsidies have been by far the most common policy response [to the crisis] among emerging and developing economies,” the World Bank said, adding that “Countries with substantial subsidies in place generally have had smaller increases in retail gasoline prices than non-subsidizers, but this relationship weakened considerably for headline inflation.”

Source: Oilprice