Russell: The war between Iran and the US will supercharge Asia’s transition from fossil fuels towards electrons.

The U.S.-Israeli war against Iran has turned out to be an 'aha moment' for Asia. This is the continent that is most vulnerable to the loss of crude and liquefied gas through the still mostly closed Strait of Hormuz.

China was largely responsible for the electrification of this region, which is home to the world's fastest-growing population.

The ripple effect from the loss of?of?about 10 million barrels of crude and refined products per day (bpd), and around 20% of global LNG, is proving to be a game changer.

Industry professionals now consider that the rapid deployment of BESS in Southeast Asia and South Asia, as well as an increasing penetration of EVs (especially two- and 3-wheelers), is a guarantee.

At the Asia Battery Raw Materials & Recycling Conference held in Hanoi this week, the optimism was palpable. The delegates were more concerned with how to increase demand than to find enough raw materials for batteries.

It is a well known fact that EVs are gaining popularity in China. Their market share reached around 50% of all new vehicles sold last year. They also made rapid gains in heavy vehicles like trucks and buses.

It is less well known how fast the markets of Asia ex-China will electrify their vehicle fleets and how rapidly they are expected grow in the coming years.

According to Fastmarkets' Head of Battery Raw Materials Research Paul Lusty, the EV sales in Vietnam grew by 150% between 2024 and 2025. Thailand also saw a 150% increase in both years.

There are signs that the rest of Asia has caught up to the Chinese?car manufacturers. Their products have become more competitive in price with internal combustion engines (ICE).

Vietnam's VinFast went from selling 7,000 electric vehicles in 2022 to 197,000 by 2025. It has also expanded beyond its home country, opening plants in India and Indonesia.

The growth of the EV industry has been largely due to government policies that encourage the use of EVs and convince the public they are not a luxury and can be purchased by families in the emerging middle class.

Two- and three-wheelers

For the less well-off, EV manufacturers will boost the availability and competitiveness of the two-wheelers and three-wheelers that are important in Southeast Asia and South Asia.

According to Fastmarkets the sales of these vehicles will grow at a 30% compound annual rate in the coming years. This is due to lower purchase and operating costs, as well as the expansion of charging stations and battery swapping stations.

In countries where gasoline and diesel are priced competitively, the momentum for EVs will likely increase.

Even in countries where fuel is subsidised, rising crude oil prices and the price of refined products create fiscal pressures that force governments to adopt policies that encourage electrification.

Asia will also'see a boom in BESS systems, as countries increase variable electricity production from renewables like wind and solar. They then seek to smooth out this variability by installing batteries.

According to Fastmarkets' forecast, BESS installations will increase nine-fold in the world by 2036 compared to 2025 levels. China and other Asian countries are expected to experience strong growth.

The rapid deployment in Asia of BESS and EVs will reduce the demand for refined products, such as gasoline and diesel. It will also reduce the use of LNG to generate gas-fired electricity.

The demand for naphtha will likely increase, due to the increasing use of plastics.

As wealth levels rise, so will the demand for jet fuel.

The oil industry will face challenges as the electrification of society increases.

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These are the views of the columnist, who is also an author. Clarence Fernandez edited this article

(source: Reuters)