In response to severe energy shortages, countries like the Philippines, Myanmar, and Sri Lanka are implementing drastic conservation measures. These include four-day workweeks for government employees, driving limits, and gasoline rationing, signaling the acute real-world impact of the supply shock.

Despite energy shocks, global oil prices have been partly contained because China has significantly reduced its imports. By drawing from its large, previously amassed stockpiles, China is inadvertently acting as a stabilizing force, absorbing some of the market pressure.

In a severe supply shock, demand destruction isn't about wealthy consumers driving less. Instead, lower-income countries are priced out of the market entirely, unable to attract scarce barrels. This transforms a price problem for developed nations into an outright physical shortage for developing ones.

Asia is uniquely vulnerable to the current energy crisis not just from price increases but from physical supply shortages—a factor rarely modeled in past shocks. This dual risk poses a more significant threat to economic growth than in other regions, with some economies already facing rationing.

Emerging markets have already reduced oil consumption to a minimum due to physical supply unavailability ('demand loss'). Therefore, for the global market to rebalance, the next phase of demand reduction must come from developed economies like the U.S. and Europe. This will require significantly higher product prices to force a change in consumer behavior.

Despite the closure of the Strait of Hormuz, oil prices remain far below the expected $200/barrel. This is because pipeline bypasses, strategic reserve releases, and significant demand destruction in countries like Pakistan and Bangladesh are cushioning the blow, unlike the 2022 shock which hit Germany.

A colonial-era demarcation still defines oil markets. Asia ('East of Suez') relies heavily on Middle Eastern oil and feels disruptions almost immediately. Europe and the Americas ('West of Suez') are more detached, experiencing the crisis with a significant time lag.

Despite holding 65-70 days of crude oil reserves, Asian governments and industries begin rationing energy as soon as supply chains tighten. This preemptive action means the economic pain of a disruption is felt much sooner than official inventory levels would suggest, making the reserves a poor gauge of immediate impact.

While media focuses on Europe and Japan, the IEA head highlights that the biggest victims of the energy crisis are developing countries. Lacking hard currency to compete for expensive oil and gas, they face severe economic strain, potential energy rationing, and a repeat of the 1970s foreign debt spirals.