Pockets of extreme tightness in refined fuel supply across Asia are emerging as a major constraint on growth, with the Philippines among the most exposed economies, according to think tank Oxford Economics.

In report last Wednesday, April 15, Oxford Economics senior economist Sheana Yue warned that shortages in jet fuel, marine fuel, and petrochemical feedstocks are weighing on transport, trade, and manufacturing activity across the region, with ripple effects on inflation and external balances.

The Philippines stands out as particularly vulnerable to an aviation-driven slowdown, alongside Thailand, due to its heavy reliance on international tourism. “The Philippines and Thailand appear most exposed to a jet fuel-triggered aviation downturn given the importance of international arrivals to GDP [gross domestic product] and employment,” Oxford Economics said.

The think tank said fuel shortages are already constraining flight capacity across Asia, with airlines cutting shorter routes to prioritize more profitable long-haul services. It cited that the Philippines had “flagged potential flight groundings,” while carriers in Indonesia, Malaysia, and Vietnam have begun reducing flights as fuel inventories dwindle.

Oxford Economics warned that such capacity constraints could quickly spill over into the broader services sector. Given the labor-intensive nature of tourism, reduced air connectivity may weigh on accommodation, retail, and domestic transport, amplifying the economic impact, it pointed out.

Beyond aviation, disruptions in marine and air fuel supply are tightening regional logistics capacity, raising freight costs, and prolonging supply chain frictions, the report warned. These pressures are expected to reinforce inflation, particularly in trade-dependent economies like the Philippines, which is a net importer of the goods it consumes.

The think tank explained that higher transport costs tend to amplify broader price pressures, especially during supply shocks. While freight costs account for a small share of final goods prices, disruptions in the availability of inputs can drive sharp cost increases when substitutes are limited, forcing firms to pass on higher costs to consumers, it added.

The Philippines is also exposed through its role in regional manufacturing supply chains. As an emerging assembly hub with limited upstream refining capacity, the country relies heavily on imported intermediates, including petrochemical feedstocks such as naphtha, the report noted.

“In economies such as Vietnam and the Philippines, where downstream assembly is relatively large, this can increase exposure to margin compression and export competitiveness pressures if regional feedstock supply tightens,” Oxford Economics said.

Supply constraints in petrochemicals—used in plastics, packaging, and electronics components—could create bottlenecks that ripple through manufacturing, particularly in sectors linked to electronics and consumer goods, it warned.

At the same time, the think tank expects higher refined fuel import costs to widen trade deficits and add pressure on regional currencies, particularly in oil-importing economies like the Philippines. The oil-vulnerable Philippine peso already fell to record lows nearing the ₱61:$1 level last month.

“A sustained increase in fuel import bills weakens terms of trade and places downward pressure on regional currencies, particularly where energy imports represent a sizeable share of total goods imports,” Oxford Economics said, warning that currency depreciation could further fuel imported inflation by raising domestic prices of fuel, transport, and consumer goods.

The report added that inflationary effects may be non-linear, with refined fuel shortages amplifying the impact of already elevated global energy prices. While central banks across the region may respond with modest tightening to anchor inflation expectations and stabilize currencies, policy tools remain limited in addressing supply-driven shocks, it said.

For Oxford Economics, fiscal measures such as subsidies, tax adjustments, and targeted transfers are likely to play a larger role in cushioning the impact, although these cannot fully offset disruptions caused by fuel shortages and logistics constraints.