Hormuz Shock, Taiwan's Other Bill

• The gas-cutoff bill: natural gas and electricity. Nearly half of Taiwan's electricity runs on gas, and its largest LNG source, Qatar, must pass through Hormuz — this is a tail risk, and the worst case is a power shortage.
• The deferred bill: price increases in oil, electricity and gas absorbed by the rate freeze at CPC and Taipower. Invisible for now, but it will come back through electricity-price catch-up increases and treasury top-ups.
• The cash-now bill: ocean freight, air freight, fuel surcharges and war risk insurance. Nobody absorbs this one for you — it has to be paid right now.

Separate these three bills, and you will see that the "oil price" most businesses are worrying about is actually the least lethal of the three.

More than 95% of Taiwan's energy is imported — 95.4%, per the Energy Administration (Ministry of Economic Affairs) data for ROC Year 114 (2025) ^[4]. When people think of energy security, they instinctively think of oil — but oil is actually the most diversified, least fragile of the three bills. Of Taiwan's crude-oil sources, Saudi Arabia supplies about four-tenths and the Middle East as a whole about seven to seven-and-a-half tenths, but the United States already supplies about two-tenths, an important buffer; by comparison, about 95% of Japan's crude comes from the Middle East ^[4][16]. Expensive oil hurts, but it does not cut off supply immediately.

The real vulnerability is natural gas.

In 2025, nearly 80% of Taiwan's electricity came from thermal power, of which gas supplied 47.7% — nearly half of Taiwan's electricity is generated by burning natural gas ^[22]. And Taiwan's LNG is highly concentrated in a handful of sources — on a 2025 basis, Qatar about 34%, Australia about 33.5%, and the United States about 10% ^[13][14], with the top two sources together accounting for nearly 70%. The problem is: Qatar's LNG has to pass through the Strait of Hormuz to be exported. When the strait was blockaded, and when Qatar's largest export facility, Ras Laffan, was hit by an attack and shut down production, the single largest chunk of Taiwan's gas supply was choked off ^[13][15].

Even more critical is the inventory. Taiwan's LNG safety stock is only about 7 to 11 days, depending on how it's measured ^[23][24]. Oil can be stockpiled and diversified gradually; natural gas cannot — it has to be frozen into a liquid at −162°C, requires dedicated ships and receiving terminals, and if you can't buy it on the spot market, you simply can't get it. During the crisis, the government relied on advance delivery of long-term contracts, sourcing swaps with other Asian neighbors, and an added round of U.S. natural gas purchases in June to fill the gap — but in May there was still a scheduling shortfall equivalent to four shipments ^[14][15].

Expensive oil is a bill that hurts. A natural-gas cutoff is a bill that causes blackouts. Taiwan's true energy-security vulnerability is that roughly 7-to-11-day line of natural-gas inventory.

The decision implication of this bill: large gas and power users (semiconductors, panels, petrochemicals, data centers) cannot assume "the government can always source more gas." Treat "a critical-process gas cutoff / regional power rationing" as a risk scenario, and take stock in advance of your own backup power, storage and production scheduling contingencies — this is a national-level risk, but it is your production line that stops.

This is the bill most likely to lead businesses to misjudge the situation.

International oil prices jumped by 50%, yet Taiwan's Consumer Price Index (CPI) barely moved — in March, the central bank had already revised its 2026 CPI forecast upward to 1.8%, still a mild range, though it could be revised upward again if oil prices keep climbing ^[19]. Many business owners see this figure and breathe a sigh of relief: "Looks like inflation hasn't hit Taiwan."

That is an illusion. The CPI is well-behaved because the pain has been absorbed by the "rate freeze."

The floating fuel price mechanism has repeatedly frozen prices during the crisis, with CPC continuing to absorb the price gap itself; cumulatively, the price gap absorbed in this round (since the Middle East conflict began) has reached roughly NT$16.66 billion as of May 30, and CPC's cumulative losses are already approaching NT$80 billion, forcing the Ministry of Economic Affairs to step in with capital injections and financing to rescue its finances — and the Directorate-General of Budget, Accounting and Statistics is already studying a subsidy top-up for CPC ^[12][20][21]. On Taipower's side, electricity prices have likewise been held down, with the state-run utility similarly swallowing the rise in generation costs — in late March, the electricity-price review committee decided to keep rates frozen, leaving on hold a 1.8% increase that should otherwise have taken effect, with Taipower's cumulative losses now around NT$350 billion ^[25].

So, the bill hasn't disappeared — it has simply moved from the price board at the gas station to CPC's and Taipower's losses, to future electricity prices, and to treasury top-ups. This is what CommonWealth Magazine called the "unexploded inflation bomb" — oil prices surging while the CPI stays flat does not mean Taiwan is immune to inflation, it means the bill has been deferred ^[9]. The central bank has already warned it may revise its inflation forecast upward because of oil prices; when a lawmaker also raised the possibility of a rate hike, the central bank gave no clear answer either way ^[19].

A rate freeze is not magic that makes the bill disappear — it is an IOU that defers it. IOUs always come due — usually in the form of an electricity-price catch-up increase.

The decision implication of this bill: don't be fooled by "the CPI hasn't risen." Treat an "electricity-price catch-up increase" as your baseline scenario for 2026–2027, not a risk scenario. Lock in prices on any long-term contract you can, and put in place energy and currency hedges you can arrange, before this bill comes due.

The first two bills are both "pay later." This one is "pay now."

The moment the crisis broke out, transportation costs jumped immediately. Container shipping rates on major routes have risen by more than 40% on average since May, with the Far East–U.S. West Coast route spiking 52% in a single month — driven partly by fuel and operating costs pushed up by Hormuz, and partly by a rush to ship ahead of tariff deadlines ^[17]. Industry sources also report that tanker freight rates and war risk insurance premiums have jumped in tandem, though no traceable public data confirms this. On the aviation side, EVA Air's fuel surcharge spiked along with oil prices in April, then pulled back from that high starting June 7 to US$35 per short-haul segment and US$91 per long-haul segment — still a cost businesses have to pay in cash (and it was cut again, to US$27.5 and US$71.5, starting July 7) ^[7][26]; airlines' profits are being squeezed by fuel costs, while shipping stocks are actually benefiting from higher freight rates — two very different fates in the same crisis.

There is no "rate freeze" to absorb this bill for you. For exporters, importers and logistics companies, it directly drives up your landed cost and eats into your quoted margins.

The decision implication of this bill: recalculate freight, fuel surcharges and currency effects into every single quote. Whatever can be passed on to customers, negotiate it now while freight rates are high and everyone else is raising prices too; whatever can be shifted to shorter shipping routes, diversified ports or advance stockpiling, do it early — of the three bills, this is the one you can control yourself the most.

So where do oil prices go from here? Two numbers that are easily conflated need to be separated.

One is the crisis peak: at the tensest point of the blockade, Brent briefly surged past $114 in early May ^[8].

The other is the full-year average. The World Bank's April 2026 forecast puts the full-year Brent average at about $86, a clear rise from $69 in 2025 — on the assumption that the most severe disruption ended in May and Hormuz gradually recovers before the end of the year, before falling back to about $70 in 2027 ^[1][5][6]. But under an adverse scenario, the full-year average could reach as high as $115 ^[1].

In practice, the strait reopened after roughly 110 days of blockade, though the situation remains volatile ^[11]. So the takeaway for businesses is simple: don't scare yourself into overreacting based on the $114 peak, and don't relax and stop preparing just because "the crisis has passed." Using $86 as a baseline and up to $115 as a stress test is more practical than betting on a single number.

Responsibility for this crisis is itself contested — and that contest will shape which way Taiwan leans.

One reading is: it was the United States and Israel that struck Iran first and attacked its energy facilities, and the blockade was a countermeasure; pinning the entire oil-price surge on Iran obscures the responsibility of whoever started the war, and under high oil prices, U.S. shale oil and LNG exports are actually the beneficiaries — Taiwan "buying more U.S. gas" is, to some extent, simply swapping its energy dependence from the Middle East for dependence on the United States.

Another reading is: motive does not change the consequence — what actually puts Taiwan at risk of a gas cutoff is the weaponization of a civilian energy shipping lane; what Taiwan should do is accelerate diversification toward rule-of-law, reliable long-term-contract partners (the U.S., Australia), rather than getting caught up in arguing over who struck first. "Reliable dependence" and "fragile diversification" carry entirely different kinds of risk.

This team does not take sides, but the two readings share one overlap, and that is what Taiwan should remember: concentration in a single strait plus a single source is a real risk Taiwan must reduce. However you assign blame, pinning a third of your gas supply on a strait that can be blockaded is not a bet a small country should be making.

Converging this down to three Taiwanese stances (decision-oriented, not investment advice), turned directly into the tools in the next section that you can put to use.

For the state, the gas-cutoff bill needs to be tackled by reducing source concentration (diversifying to the U.S. and Australia, strengthening receiving terminals and strategic gas reserves); the deferred bill needs a clearly communicated exit path for the rate freeze, so that neither the state enterprises' losses pile up without limit, nor businesses are caught flat-footed when the catch-up increase lands.

For industry intermediaries (associations, industry alliances), the task is to help members map their combined "energy plus transport" exposure down to the item level, and organize joint hedging, joint bargaining and shared dispatch information — spreading a tail risk that no single small company could bear alone.

For SMEs, the most practical first step is to split the three bills apart and calculate each one: which costs are being paid now, which are being deferred, and which could be cut off entirely. Once you understand that, you'll know which one to pass on, which one to lock in, and which one needs a contingency plan.

Turning the judgments above into three tables you can apply directly.

Tool One: Self-Assessment of Combined Energy + Transport Cost Exposure

Tool Two: Three Bills × Three Stances Decision Matrix

Tool Three: A 5-Step Framework for Modeling Landed Costs + Electricity-Price Scenarios (illustrative figures)

Note: the figures in Tool Three illustrate the calculation logic only, and are not the actual figures for any specific company; substitute your own electricity usage, export structure and actual freight rates.

The oil-price peak will pass, and the Hormuz blockade will reopen, tighten again, tighten again, and ease again. But for businesses in Taiwan, what truly needs to be remembered is not any single oil-price figure, but this structure: the bill you're paying was never just the one at the gas station. Only by looking at the gas-cutoff bill, the deferred bill and the cash-now bill separately will you avoid being caught off guard, in the false calm of the CPI, by an IOU that is bound to come due eventually.