The economies of the ASEAN countries – Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand – are highly energy dependent. The member countries have always been vulnerable to price, supply, and demand swings relevant to energy resources. Any disruption in energy supply and price represent a serious threat to economic stability as was proved by the oil crises of 1973-74 and 1979-80. Both crises caused higher inflation, depressed the export market, and raised import expenditures. The economy of the region slowed down considerably.

In response to the volatile behaviour of the oil market, oil importing countries, since the first oil crisis, have increased indigenous energy production, diversified their source of energy supply, intensified substitution efforts to replace oil with alternative energy resources, and have reduced energy intensity significantly. Similarly, to minimize the impact of lower oil prices in the economy, Malaysia and Indonesia, the major oil exporting countries in the region, have increased the share of non-oil-and-gas exports dramatically and are now better prepared to absorb the shock of lower oil prices than in the 1970s.

However, even with these structural changes and the experience of two decades of dramatic price fluctuations, the region is still vulnerable to energy prices and supply disruptions as demonstrated by the energy problems triggered by the Iraqi invasion of Kuwait in 1990. Higher oil prices generated a multitude of problems – pressure in trade balance and balance of payments, inflation, and the curbing of economic growth in oil importing countries. The oil windfalls produced by the 1990 energy crisis were still highly significant to Indonesia and Malaysia.

The strong relationship that exists between energy and economic development in the ASEAN countries (as is true in many developed as well as developing countries) makes comprehensive energy planning imperative, but the uncertainty involved in the energy market makes such planning increasingly difficult. As a consequence the energy situation has to be assessed and policies have to be reviewed regularly.