PremiumDemand Destruction Has Arrived
Yesterday we made an observation showing that while oil prices have certainly surged (and nowhere more so than in Dubai where cash oil just hit a record for any oil contract $177 before retracing), oil products have surged far more:
Oil is bad. Products are worse pic.twitter.com/rxvlhDNFsv
— zerohedge (@zerohedge) March 19, 2026
A few hours later, Bloomberg's resident commodity expert, Javier Blas, sent out a similar observation, blasting out a chart of the day which showed that while the White House is fighting to keep the price of WTI crude oil under $100 a barrel, "for America's Main Street what truly matters isn't the price of crude, but the cost of refined products — and those are rising fast."
CHART OF THE DAY: The White House is fighting to keep the price of WTI crude oil under $100 a barrel.
— Javier Blas (@JavierBlas) March 19, 2026
But for America's Main Street what truly matters isn't the price of crude, but the cost of refined products — and those are rising fast.
Link to my @Opinion column on reply. pic.twitter.com/YyZZbZjNIz
But while prices of US refined products are still manageable, where the real hit is taking place, is in Asia, where as we reported previously and JPMorgan's Natasha Kaneva confirms in daily update, "demand destruction has begun."
According to Kaneva, by mid-March, multiple sectors in Asia had shifted into a defensive footing as energy prices spiked and supplies tightened. The retreat in refined product flows is already visible: shipments from the region’s major exporters are down about 30% over the past 10 days versus the five‑month baseline, with preliminary data for the last week pointing to an even steeper 35% drop. The pullback is sharpest in jet fuel (down more than 40%), followed by gasoline (down more than 30%) and diesel (down more than 20%)
Similar to the US, but far more dire, Diesel has emerged as the region’s immediate choke point, with surging prices slowing both travel and freight.
Governments are responding with a mix of demand management and emergency measures. Bangladesh brought forward the Eid-al-Fitr holiday and allowed universities to close early to save fuel. The Philippines and Sri Lanka instituted four‑day workweeks to curb diesel use and stretch dwindling stocks. Pakistan closed schools and shifted universities online. Officials in Thailand and Vietnam have been urged to use stairs, work from home, and limit travel, while Myanmar introduced alternating driving days to reduce road fuel demand. In parallel, authorities are intervening directly into fuel markets to stabilize fuel prices.
Aviation shows the strain most visibly. As jet fuel approaches $200/bbl, carriers are shifting from cost management to outright service withdrawal, with many routes rendered uneconomic. As of March 18, several Asian airlines, including Qantas, Air India, Cathay Pacific, and IndiGo, have introduced phased fuel surcharges. Long-haul Air India tickets from Asia to Europe or North America now carry a $125-200 surcharge per passenger, with an additional $4.30 on domestic flights—effectively pricing out many leisure travelers for the upcoming summer season. Scandinavian Airlines (SAS) and Air New Zealand were among the first carriers to cancel or reduce flights due
to soaring jet fuel prices.
In many regions, demand isn’t being reduced by choice but by the physical absence of inputs. Asian and European steam crackers rely on naphtha and LPG from the Persian Gulf, and with those feedstocks constrained, shutdowns and curtailments are occurring immediately. Asia is the most exposed, sourcing more than 50% of its naphtha from the Middle East.
Japan offers a clear example. With over half of its naphtha imported—roughly two-thirds from the Middle East—petrochemical producers are trimming output:
- Mitsubishi Chemical and Mitsui Chemicals have reduced ethylene runs, while Sumitomo Chemical may delay restarting Keiyo Ethylene and expects reduced rates even after restart.
South Korea is also seeing pressure build across the sector.
- YNCC, one of the region’s largest ethylene producers, has declared force majeure and is running its cracker at significantly reduced rates.
- Both Lotte Chemical and LG Chem have warned customers that they may follow, and the government has temporarily designated naphtha an “economic security item” to manage dwindling stocks.
The strain extends across Greater China and Southeast Asia.
- In China, Sinopec has cut March refinery runs by about 10% to conserve crude stocks.
- A Shell–CNOOC joint venture has shut its Huizhou ethylene cracker and told customers that polyethylene shipments are suspended indefinitely effective March 5, while Wanhua Chemical has declared force majeure for Middle Eastern customers amid severe LPG feedstock disruptions.
- In Indonesia, Chandra Asri is operating at reduced rates and has declared force majeure following a sudden halt in feedstock arrivals.
- In Taiwan, Formosa Plastics Group’s Taiwan Petrochemical declared force majeure on March 10 and indicated that, if shortages worsen, volumes will be allocated based on actual availability.
- India suspended shipments of LPG to commercial operators to prioritize supplies for households, leading to worries from hotels and restaurants that they may be forced to close.
Oil demand is, on average, highly inelastic in the short run because most end uses have few immediate substitutes—factory boilers rely on fuel oil, aircraft require jet fuel, and most cars still run on gasoline. JPM's estimate of the short‑run price elasticity of global oil demand is −0.024, implying that a roughly 40% price increase above 12‑month highs is needed to reduce total consumption by 1%.
The response, however, varies materially by product. Naphtha is most sensitive because petrochemical plants can partially substitute ethane in cracking operations. Jet fuel is also relatively responsive, as airlines can cancel lightly loaded flights when fuel costs spike. By contrast, fuel oil is least elastic given its role in essential services like home heating, marine transport, and power generation.
Taken together, these elasticities imply that if Brent averages $100 in March, the price effect alone would trim global demand by about 1 mbd in April— before accounting for additional losses from grounded flights in the Middle East and outright physical shortages.
