NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, August 24, 2018

By Ann Koh and Claire Jiao

Oil’s rebound from the biggest price crash in a generation is sparking another revival: the use of cheaper, dirtier fuel in Southeast Asia’s two most-populous nations.

Indonesia has sought to buy more lower-quality gasoline so far this year than the whole of 2017, while the Philippines is set to resume imports of higher-sulfur diesel after two years. The nations are embracing such supplies once again as crude’s recovery exacerbates economic pain and boosts inflation, threatening to undermine efforts made during oil’s slump to curb pollution.

The shift in focus to lower-cost dirty fuel and away from the pursuit of cleaner air coincides with political pressure in the countries to shield the public from rising prices. Emerging markets are grappling with weaker domestic currencies and investors pulling out money, with everything from higher U.S. interest rates to a stronger dollar and the American-Chinese trade war to contagion from the crisis in Turkey posing a threat.

Photo courtesy of Steve Taylor.