Pacific Islands Face Unique Vulnerability as Oil Crisis Deepens

When 53-year-old Agbar Mohammad pulled into a petrol station in Fiji in May, he expected a queue. Instead, it was nearly empty. “I could only see one or two cars at the service station, which was very unusual,” Mohammad said.

The reason became clear quickly: as Mohammad filled his car, the numbers on the fuel pump climbed far faster than the needle on his dashboard. Normally he would put in about $40 of fuel, but this time $100 barely got his 60-litre tank halfway full.

The Pacific region is already on the front lines of the climate crisis due to rising sea levels and increasing natural disasters. But the fuel crisis sparked by the US-Israel war on Iran is exposing another fossil-fuel vulnerability. The region’s heavy reliance on imported oil is expected to curb economic growth and stoke inflation. Shortages are already affecting the price of cassava, the cost of school runs, and business margins.

Dr. Rubayat Chowdhury from the Australian National University said Pacific Islands are heavily dependent on imports for food and basic necessities. In a region that relies on tourism, remittances, and foreign aid, higher fuel prices will not only increase the cost of goods but also threaten incomes.

“The Pacific will be hit hard,” Chowdhury said, citing two main reasons: “The first is its remoteness. And the second is small populations.”

Oil accounted for more than 80% of the region’s energy supply in 2023, with over half used for transport and more than a third for electricity.

In 2024, at least eight Pacific countries generated over half of their electricity from oil products — more than 90% in Solomon Islands and over 80% in Tonga and Nauru. In comparison, Australia and New Zealand derived 2.3% and 1.5% of their electricity from oil, mostly from small, intermittent sources like remote generators.

Many Pacific countries have set targets to generate 100% of electricity from renewables by 2030. Some, like Tokelau, have already achieved this, but most have not.

In 2019, oil products accounted for about 20% of all imports for some Pacific countries. Many also import large amounts of food and other staples that cannot be produced locally, meaning higher transport costs affect a wide range of goods and services. UN data from 2021-23 shows food made up over 20% of net imports in Samoa and Tonga, and over 29% in Kiribati.

Many Pacific countries are taking action before oil supply shortages hit. Fiji’s parliament voted for a 20% pay cut for its members due to budget pressure from the global fuel price shock. Other countries have repeatedly hiked fuel prices while offering relief to businesses and residents.

To improve fuel security, the Australian government announced $30 million in support for Fiji, including a supply and storage hub. Fiji’s Prime Minister, Sitiveni Rabuka, said this would support the upcoming national budget as Fijians brace for another fuel price increase this month.

Guardian Australia analysis of global trade flows in 2024 found that Pacific countries receive most of their fuel from just one of a handful of countries — Singapore, Malaysia, South Korea, and China. Some source 80%, 90%, or more of their oil products from a single supplier.

This concentration could leave Pacific countries exposed if suppliers must prioritize their domestic markets. Australia has been warned that Malaysia or South Korea might need to do so if the crisis continues.

Dr. Chowdhury also noted that Australia is relatively protected from an oil supply shock due to its purchasing power and status as one of the world’s largest producers and exporters of liquefied natural gas.

“It’s relatively easier for bigger nations like Australia to negotiate, right? To reach out to Brunei, for example, to secure the oil supply. “It’s not easy for Solomon Islands or the [Federated States of Micronesia] to do the same,” he said.

For Agbar in Suva, the fuel crisis has so far meant working longer hours just to break even. For bus operators, margins have tightened. For farmers from provinces like Tailevu, Naitasiri, and Ra, it means paying more just to get produce to market.

For fellow driver Gerald Elaisa, every trip now involves calculation.

“We only buy fuel for the important runs – school, work, home,” he said. “The children now catch the bus or walk. We are cutting down on unnecessary spending.”

For many Fijian families, fuel is no longer just about filling their tanks. It is shaping how they live.