US-Iran Conflict Sparks Oil Price Surge, Taiwan Government Subsidizes High Energy Costs

The conflict between the United States and Iran has led to a significant reduction in global crude oil supplies, triggering violent fluctuations in spot oil and gas market prices. Since early 2024, international oil prices have climbed steadily from around 70 US dollars per barrel to nearly 90 US dollars, with volatility exceeding 10 percent. This fluctuation not only impacts international markets but also directly strikes Taiwan's energy supply chain. Taiwan is highly dependent on imported oil and natural gas, and any supply disruption or price increase is rapidly transmitted to domestic energy costs, subsequently affecting multiple sectors including electricity, transportation, and industry. To maintain stability in the domestic energy market, state-owned enterprises CPC Corporation, Taiwan (CPC) and Taiwan Power Company (Taipower) have been forced to take various measures, absorbing high costs to ensure that the public is not excessively impacted by soaring energy prices.

During this period, CPC has primarily faced rising costs for imported oil and natural gas. Due to high international oil prices, CPC has had to pay higher unit prices on import contracts and must increase import volumes to maintain domestic petroleum supplies. To prevent retail fuel prices from soaring, the company has absorbed some of the costs into its operating expenses and adjusted internal pricing mechanisms to minimize the impact on end consumers. On the other hand, Taipower has faced soaring fuel costs, particularly sharp increases in the costs of coal-fired and gas-fired power generation. To maintain electricity price stability, Taipower must strengthen cost control in fuel procurement, transportation, and storage, while adjusting its power generation mix in the short term to reduce its reliance on high-cost fuels. Under heavy cost pressures, both companies have had to absorb some expenses into their corporate financial budgets, posing significant challenges to their financial positions.

The Department of State-Owned Enterprises under the Ministry of Economic Affairs stated that to enable CPC and Taipower to operate stably and mitigate the impact on public livelihood prices, the government should allocate budgets to subsidize these related costs. The department noted that state-owned enterprises play a critical role in national energy security and the protection of public livelihoods. Without sufficient financial support, it will be difficult for them to withstand high cost pressures in the short term, which would in turn affect their operational efficiency and long-term development. The Ministry of Economic Affairs also mentioned that budgetary subsidies would help curb upward pressure on energy prices, ease the burden on the public, and maintain the normal operation of industrial and commercial activities. This measure also aligns with the government's policy objectives of stabilizing prices and protecting public livelihoods.

From a macroeconomic perspective, fluctuations in energy prices directly affect the overall inflation rate. According to data from the Directorate-General of Budget, Accounting and Statistics of the Executive Yuan, Taiwan's Consumer Price Index (CPI) rose to 5.2 percent in the first quarter of 2024, with the energy sector accounting for approximately 12 percent of the index. If energy costs continue to climb, it could drive up overall prices, further compressing domestic consumption and corporate investment. For the manufacturing and export-oriented sectors, rising energy costs not only increase production costs but may also weaken international competitiveness. If state-owned enterprises fail to receive sufficient financial support, it will be difficult for them to strike a balance between cost control and price adjustment, ultimately leading to market imbalance and intensified pressure on public livelihoods.

Regarding the long-term trends of the international energy market, the globe is gradually transitioning toward renewable and low-carbon energy. The supply instability brought by the US-Iran conflict also serves as a reminder to all nations to accelerate energy diversification and supply chain diversification. Taiwan's current energy structure remains dominated by imported oil and natural gas; accelerating the deployment of renewable energy sources such as solar and wind power in the future will help reduce sensitivity to international oil price fluctuations. Against this backdrop, state-owned enterprises also need to find a balance between cost absorption and energy transition. If the government can provide CPC and Taipower with necessary financial support through budget allocations, it will help both companies stabilize operations in the short term while creating a more favorable environment for long-term energy transition.

In summary, when facing the global energy supply crisis, state-owned enterprises have already absorbed high costs and attempted to maintain domestic energy market stability through various internal mechanisms. The Department of State-Owned Enterprises of the Ministry of Economic Affairs calls on all sectors of society to support the government in allocating budget subsidies to ensure the stable operations of CPC and Taipower and to alleviate the public's price burden. Securing financial support in the short term will provide a solid backing for Taiwan's energy security and economic stability while laying the foundation for future energy transitions. (Source of facts: Central News Agency)