Global energy crisis exposes developing nations' lack of oil reserves

The blockade of the Strait of Hormuz has caused the worst energy crisis in modern history, forcing governments to urgently release emergency oil reserves. However, developing countries are among the least prepared to mitigate the impact.

Skyrocketing fuel prices resulting from the U.S.-Israel war on Iran have affected most of the world, but poor, import-dependent nations are hit hardest and have the least energy reserves to cushion the shock.

The International Energy Agency (IEA), the Paris-based body tasked with ensuring global oil supply, only includes industrialized countries from the Organisation for Economic Co-operation and Development (OECD). Founded in 1974, when developed Western nations accounted for the bulk of global oil consumption, the IEA's 32 member countries represent only about 16% of the world's population.

While the IEA coordinated the release of 400 million barrels from emergency stocks in March to lower prices globally—theoretically benefiting all nations—the move also highlighted the shortage of reserves across developing countries.

Beyond the Middle East and Central Asia, the epicenter of the conflict, the Asia-Pacific region—where many economies rely heavily on imported fuel—is projected to suffer the greatest economic damage. In its latest forecast last month, the Asian Development Bank (ADB) cut its 2026 growth projection for developing economies in the region to 4.7%, down from 5.1%.

Khalid Waleed, a researcher at the Sustainable Development Policy Institute in Islamabad, Pakistan, said this leaves developing nations among those “least able to pay high prices,” making them especially vulnerable to price shocks.

“Strategic oil reserves are expensive to build, fill, finance, rotate, and manage,” Waleed said. “For countries facing foreign exchange constraints, debt repayment pressure, food import bills, electricity subsidies, and social protection needs, holding millions of barrels of oil in storage can look like a luxury, even if it is strategically necessary.”

Estimating oil reserves across countries is difficult due to incomplete data. IEA member states are required to maintain oil reserves equivalent to 90 days of net imports as a buffer against price shocks. As of March, member countries held a total of 1.2 billion barrels in public stocks, plus another 600 million barrels held by the private sector under government mandate.

While the IEA represents less than one-fifth of the global population, some non-IEA countries also hold large reserves. China is estimated to maintain about 1.4 billion barrels of emergency stocks—more than the combined reserves of the United States, Japan, OECD European members, and Saudi Arabia. Other non-IEA countries with significant reserves include India, Saudi Arabia, the United Arab Emirates, and Iran. According to IEA estimates, the top 10 countries or blocs hold 70% of total global reserves.

Andreas Goldthau, an energy expert at the Willy Brandt School of Public Policy at the University of Erfurt, Germany, noted that as the economic weight of countries like China and India has grown in recent years, the IEA's influence over oil prices has waned, leading to greater risks for global energy security.

Claudio Galimberti, chief economist at Rystad Energy, estimates that more than 70% of the world's population lives in countries lacking sufficient buffers. He argued that nations should aim to maintain reserves for 120–150 days, exceeding the IEA's 90-day requirement, to better manage energy price shocks.

In much of developing Asia, where economies are heavily reliant on fuel imports, public statements from officials suggest existing reserves fall far short of IEA standards. In an interview with Samaa TV late last month, Pakistan's Federal Minister for Energy Ali Pervaiz Malik said the country had only enough crude oil reserves for 5 to 7 days. Meanwhile, officials in Indonesia, Bangladesh, and Vietnam estimated their current reserves cover between 23 days and one month.

Neil Crosby, head of research at Sparta in Singapore, said many developing countries not only lack the financial capacity to build strategic reserves but also face technical problems, such as grid instability and inadequate domestic refining capacity. He said: “Ultimately, the strongest long-term defense is to accelerate renewable energy projects to permanently decouple local power generation from international oil markets.”

Although developing economies could benefit from greater international energy cooperation, energy crises in these countries are often exacerbated by “anti-free-market” policies, said Adi Imsirovic, a veteran oil trader now teaching at the University of Oxford.

Some analysts argue that the fallout from the U.S.-Israel war on Iran points to a need for new mechanisms to manage global energy storage and distribution to ensure more stable prices. Rystad's Galimberti said the energy crisis could push developing nations to demand a greater voice in managing global reserves.

Rather than creating a competitor to the IEA, developing countries could pursue regional agreements on issues such as cross-border electricity trade, emergency energy sharing, and co-financing of strategic infrastructure, said Waleed of the Sustainable Development Policy Institute. However, Sparta's Crosby said efforts to provide alternatives to the IEA are likely to face practical constraints, as such blocs often struggle with internal alignment due to conflicting economic interests between net importers and exporters.