Ng Weng Hoong, Contributing Editor, explores the turbulence in the Asian oil and gas markets, while considering the future of the industry in the region.
Donald Trump would have been a formidable oil trader.
Instead, he chose politics, became the President of the US (twice), and is now shaking up the energy markets on his way to creating a new world order.
At his second inauguration on 20 January 2025, Trump launched a national energy emergency programme to boost domestic oil and gas production, raise the country’s strategic oil stockpile, and end the US’s participation in the 2015 Paris climate agreement.
Asian allies will buy more US oil
To appease Trump’s anger over their ‘unfair’ trade practices, three of Asia’s four largest energy consumers immediately committed to import more oil and gas from the US. This will impact global trade flows as India, South Korea, and Japan, which collectively account for 30% of Asia’s oil consumption, will likely reduce purchases from their traditional suppliers in the Middle East and Russia.
The trio, together with Taiwan, imported a combined record 946 000 bpd of crude from the US in 2024. They share the same motivations to further increase the purchase of US fossil fuels over the course of Trump’s second term.
Firstly, as energy-deficient countries, they are heavily reliant on imports that the US is well positioned to supply. Secondly, the increased imports will help reduce their respective trade surpluses against the US. Lastly, they want a role in building up the US’s energy sector in the hope of winning Trump’s commitment to counter China’s expansionist activities in the region.
The Trump-Modi oil bond
India has become a key geopolitical and economic partner of the US over the past decade. The personal bond developed between Prime Minister Narendra Modi and Trump has carried over from the president’s first term in 2017 to 2021.
Oil has emerged as a surprising foundation stone in the building of the two countries’ bilateral ties, with the US sending crude to India, and refined products going in the other direction and to western Europe. India’s growing energy demand has coincided with the US’s rise as a major oil producer, thanks to its shale-based revolution.
By the time Joe Biden became the 46th president in January 2021, oil and gas was already “the cornerstone of bilateral trade” between the two countries, accounting for 15% of their merchandise trade, according to analyst Hari Seshasayee writing for the Wilson Centre.2
US crude exports to India hit a record of more than 420 000 bpd in 2021, up nearly 49% from the previous year, according to the US Energy Information Administration (EIA). That growth was all the more impressive against the backdrop of the world economy plunging into recession during the COVID-19 pandemic.
But 2021’s volume turned out to be the peak as India’s appetite for US crude fell sharply the following two years when Russia, overnight, became a competing supplier.
By offering huge discounts for its oil and other commodities, Russia’s export of crude to India surged to a record of 800 000 bpd in 2022, up from just 84 000 bpd the previous year.3Russia was forced into a fire sale when it was hit by global trade sanctions organised by the US in retaliation against President Vladimir Putin’s military invasion of Ukraine on 24 February 2022. India ignored the sanctions to gorge on cheap Russian oil just as the Brent crude price rocketed past US$100/bbl in the early months of the Ukraine war.
“A study by the Indian rating agency ICRA estimated that India saved around US$5.1 billion on oil imports in 2023 and US$7.9 billion in the first eleven months of 2024, for a total of US$13 billion,” according to the National Bureau of Asian Research.3
Partly to placate the anger of American politicians, India then raised its import of US crude. For the first 11 months of 2024, India’s intake of US crude rose by 29.4% to more than 217 000 bpd. It is set to rise further as India is now the fastest growing oil consumer among the world’s major economies.
The EIA expects India to account for 25% of the world’s oil consumption growth in 2024 and 2025.
“Driven by rising demand for transportation fuels and fuels for home cooking, consumption of liquid fuels in India is forecast to increase by 220 000 bpd in 2024 and by 330 000 bpd in 2025. That growth is the most of any country in our forecast in each of the years,” said the EIA.1
In their first meeting since Trump’s re-election, Modi indicated that his government would endeavour to reduce India’s US$45.7 billion trade surplus with the world’s largest economy by boosting its import of oil and gas, and defence equipment from the US.
South Korea, Japan, and Taiwan fall in line
Like India, East Asia’s three democracies are also looking to win Trump’s favour by strengthening ties with the US oil and gas industry.
South Korea, already among the world’s most important markets for US crude, imported a record 484 400 bpd in the first 11 months of 2024, up nearly 80% from 2020.
In an interview with the Yonhap news agency, South Korean Industry Minister Ahn Duk-geun pledged to further raise his country’s import of US fossil fuels to directly address Trump’s complaint about their bilateral trade imbalance.4 South Korea reported a record US$55.7 billion surplus in its merchandise trade with the US in 2024.
Among Asian countries, Taiwan is under the greatest pressure to win over the Trump administration due to its overwhelming reliance on US protection against China’s threats to ‘reclaim’ the island. Taiwan has committed to increase energy imports and defence spending to pare down its trade surplus against the US which rose more than 3.5 times from US$18 billion in 2020 to nearly US$65 billion in 2024.
The US now accounts for nearly a quarter of Taiwanese oil imports. Due to its limited refining capacity, Taiwan is unlikely to substantially improve on its recent intake of 217 300 bpd of US crude. Instead, it will look to boost its purchase of LNG from Alaska.
Japan will follow in the footsteps of South Korea and Taiwan in raising LNG imports from the US. However, Japanese imports of US crude will remain insignificant owing to its declining appetite for oil.
References
- US Energy Information Administration. 2024. ‘India to surpass China as the top source of global oil consumption growth in 2024 and 2025.’ https://www.eia.gov/todayinenergy/detail.php?id=64084
- SESHASAYEE, H., ‘Oil: A New Chapter in U.S.-India relations’, Wilson Center, (10 February 2022). https://www.wilsoncenter.org/blog-post/oil-new-chapter-us-india-relations
- VICKERY, R.E., and CUTLER, T., ‘Oil for India’, The National Bureau of Asian Research, (3 September 2024). https://www.nbr.org/publication/oil-for-india/
- YOON-SEUNG, K., ‘S. Korea aims to expand imports from U.S. ‘constructively’ to address Trump uncertainties: minister’, Yonhap News Agency, (7 December 2024). https://en.yna.co.kr/view/AEN20241129010100320