It has been several months since the war between Iran and the United States began. Although a ceasefire was initiated in April, a formal peace agreement has yet to be reached, and the situation continues to escalate, suggesting that a resolution is not in the near future. This prolonged instability has triggered an energy crisis across the world due to its heavy reliance on oil and gas. The situation is expected to worsen with the forecasted Super El Nino that will take place from June to August.
What is the Super El-Nino?
The Super El- Nino crisis leads to 2 major threats, which are depletion of water reserves and increasing risk of heatstroke. The oil and gas industry has been dubbed as the strategic buffer for Malaysia’s economic resilience and energy security. However, this economic model has its risk for a long term proposition due to the volatility of the global gas market as well as drifting away from the country’s aspiration in achieving net zero 2050.
Here are 3 ways on how the climate and energy crisis will affect us:
- Economy & Food Security: Beyond the impact on our daily life, the climate crisis will eventually result in disrupting our food supply chain, risking food security. These threats are compounded by the recent energy crisis, with concerns raised around the spikes in price. While the government is ensuring that oil and goods reserves remain secure in the coming months, they have shied away from addressing price hikes that are leading to the rising cost of living. Precautionary steps introduced by the government have been taken, such as promoting work-from-home (WFH), a reduction in federal operating expenditures, a cut in the BUDI 95 fuel quota to 200 liters, the removal of subsidies for diesel, and exploring bio-diesel to reduce our national reliance on imports.
- Energy Resilience: Despite being an oil and gas producing country, Malaysia is a net importer of oil and gas. This basically means that our country continues to operate the “sell high, buy low” strategy. Although Malaysia is profiting from the current energy crisis, we are also diverting our oil and gas production to export markets; which leads to the question: ”Are we reserving enough for our domestic use, or are we prioritising exports during this energy crisis?” Furthermore, the volatility caused by the global conflict means we are exposing ourselves to higher expenditures on these trades. On top of that, these increased activities are driving up our national emissions. Our power provider Tenaga Berhad is not currently as badly affected with the adoption of the Automatic Fuel Adjustment (AFA), which enables them to sustain the electrical tariff during this crisis period. However, the persistence of the energy crisis will eventually lead to an increase of liquefied natural gas prices, affecting the electricity tariff.
- Climate Resilience: Malaysia is among the major LNG exporters, benefiting from the surge in global demand driven by the Iran- US war. This rising demand is a vicious cycle, as the burning of fossil fuels such as coal, oil, and gas drives up the global temperature, which intensifies the Super El-Nino. On average, Malaysia exports approximately 26–27 million tonnes of LNG annually to Japan, China, and South Korea. As our reserve is depleting, in meeting this demand it leads to more aggressive exploration. Petronas has introduced 9 new exploration block areas in its recent bidding round, previously it included block SB403, located near protected marine zones such as Tun Mustapha Park, which is within the Coral Triangle. This area is highly vulnerable, on top of the Super El Nino risking on of ocean warming, which accelerates coral bleaching and further threatens our marine biodiversity.
Retaining the current business model by prioritising oil and gas as the backbone of our economy will eventually lead to significant negative feedback towards our economy and environment. The energy crisis has already driven the shift for many countries to explore renewable energy such as solar and wind, in addition to battery storage, as it is domestically produced and offers greater energy security. Furthermore, Petronas downsized its workforce last year by 10%. While its petrochemical division, Petronas Chemicals went through RM2.14billion in losses.
These losses are expected to persist as China expands its own petrochemical capacity, creating intense market competition. Rather than doubling down on these fluctuating markets, transitioning to a decentralised renewable energy (RE) system provides a more resilient solution. By shifting away from centralised fossil fuel dependence, Malaysia can mitigate economic losses while building a stable, community-led energy future.
