The Energy Crisis is Hitting Myanmar Hard

The Iran conflict is disrupting energy supplies and roiling markets globally, with oil prices up by 50 per cent and supplies down 10 per cent. Liquified natural gas (LNG) has also been affected, as have petroleum-based products like urea – whose prices have doubled since December. The OECD projects that the conflict will increase inflation in G20 countries by 1.2 per cent. Numerous countries in Asia are particularly hard-hit, including Myanmar, due to limited reserves and dependence on imported refined petroleum. Immediate effects are already evident, while risks for key economic sectors — including agriculture and industry — are growing fast. With long-term consequences likely, the energy crisis significantly worsens Myanmar’s economic circumstances and presents a major challenge for the “new” military regime.

In Myanmar, fuel prices have surged, especially in remote, conflict-affected areas, and fuel is becoming scarce. There are reports of vehicles queuing for hours to refuel. Myanmar has grounded several domestic flights and is refuelling its international flights abroad due to domestic supply constraints. Flight ticket prices have, in some cases, tripled. Some farmers have reported challenges accessing fuel for tractors just as the critical harvesting window approaches. The energy crisis’ timing compounds all this: electricity demand is high in April and May, two of the hottest months of the year, but hydropower production — another key source of electricity — is at its lowest right before the rainy season.

The regime has responded by restricting fuel sales, including introducing an “odd-even” system, based on the last digit of the vehicle’s license plate, and a QR code scheme that limits refuelling to just twice a week. The Ministry of Electric Power has reintroduced load-shedding in Yangon, rotating between townships every four hours, with industrial zones receiving priority to maintain economic activity. The regime also announced that civil servants should work from home every Wednesday to conserve fuel. However, the regime, which already prints money to fund its budget deficit, is not likely to dole out subsidies.

The risks for key economic engines are growing. Industry — which already faced power constraints — now must contend with fuel shortages. Many factories, including those in the garment sector, rely on diesel generators for electricity. Diesel shortages could force some of these factories to close. The crisis also threatens the regime’s attempts to raise power production. VPower’s plans to restart two LNG-fired power stations may be jeopardised by LNG price pressures and availability issues.

The negative effects of the energy crisis will be exacerbated by Myanmar’s conflict.

Agriculture also faces challenges, including from fertiliser availability and price increases. Urea prices are up 50 per cent since December. China is a major exporter of fertiliser to Myanmar, accounting for 78 per cent of trade in 2024, according to UNCOMTRADE. However, China increased restrictions on fertiliser exports in late March, which will hit Myanmar. Iran also reportedly exports 400,000 and 600,000 tons of fertiliser to Myanmar; however, the war puts this at risk. Fertiliser use in Myanmar had already been declining in 2025 due to lower crop prices, and this trend will be exacerbated by price increases and supply shortages caused by the war.

Agriculture will also be affected by higher logistics prices. Getting goods to market and getting inputs to farms will be more costly, hurting farm gate prices and farmer profits. In a few areas, the lack of transport could keep agricultural products from reaching the market, causing localised price declines even as overall food prices spike. Farmers are also more vulnerable to an energy shock now than ten years ago because mechanisation has increased. Over 80 per cent of farmers now use tractors, compared to 40 per cent in 2013. The lack of fuel at the wrong time could jeopardise harvests. Switching back to human labour is difficult, as farm labour wages have spiked due to outmigration.

The negative effects of the energy crisis will be exacerbated by Myanmar’s conflict. The regime is prioritising fuel supplies for military purposes over civilian uses. They will also need more forex to purchase this fuel, squeezing funds available to private importers. This could result in fewer imports of essential raw materials and intermediate goods, an already dire situation compounded by price increases for some of these goods — namely, fertiliser. Reduced forex availability is already affecting some importers, who note that import permissions for some recent consignments are taking longer than anticipated.

The regime’s economic policies are also a risk. If the authorities insist on keeping exchange rates at current levels (despite the unofficial exchange rate depreciating by 10 per cent since the start of the Iran war), this could limit nominal wage growth in export-oriented sectors, like garments. This is because export earnings in kyat would remain flat, leaving little room for wage growth despite higher fuel costs. As crisis-induced inflation hits, real incomes would then decline. The regime’s disdain for market signals could worsen all of this by increasing the likelihood that scarce forex and resources are allocated based on political preference rather than economic benefits.

While the effects of the crisis are already acute, the long-term consequences are significant. Even if the conflict ended today, global markets and supply take time to normalise — perhaps four months, according to the Economist. Oil processing facilities could take two to four weeks to restart, while LNG facilities could take seven. Some infrastructure that was damaged in the conflict will take years to repair. Then there are the knock-on effects of the crisis, for example, reduced fertiliser usage, which results in lower agricultural yields in the second half of the year and in 2027, which could stoke inflation.

The economic challenges are compounded by conflict and political risks — an ominous start for Myanmar’s self-reappointed military government.

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