How Asia-Pacific banks are navigating energy volatility

Energy has become one of the defining forces shaping banking across Asia Pacific. Oil price spikes, the closure of the Strait of Hormuz, and swings in inflation and interest rates are flowing directly into how banks manage credit risk, price their balance sheets, and allocate capital. At the same time, the shift to renewables is redrawing the investment map, forcing banks to decide where to deploy financing across old and new energy sources.

In this episode of Future forces in Asia-Pacific banking, host Tim Colyer is joined by Abhi Bhuchar, Oliver Wyman's Head of Energy and Natural Resources, Asia Pacific, to unpack why the energy system has stayed resilient through repeated shocks and where the next pockets of volatility may emerge. The conversation also looks at whether banks' net-zero playbooks, set several years ago, still hold up given what the industry has learned since, particularly for hard-to-abate sectors and oil and gas financing.  

The discussion concludes with a practical look at what this all means for banks, from bottom-up credit risk management to treasury agility and decisions about where to deploy capital across renewables, oil and gas, and coal.

Key talking points:

• How geopolitical shocks and energy-price volatility flow through inflation, interest rates, currencies, and credit risk.
• Why energy security and the energy transition are advancing in parallel across Asia-Pacific, rather than being mutually contradictory.
• Where banks may need to refine net-zero commitments, especially for hard-to-abate sectors and oil and gas.
• How banks can strengthen risk management, treasury agility, and investment capabilities for a more volatile energy system.

This episode is part of our Future forces in Asia-Pacific banking series, which examines the trends, technologies, regulations, business models, and leadership decisions shaping the future of financial services across the Asia-Pacific. The series features conversations with industry experts to unpack the ideas and developments that matter most to senior banking executives.

Subscribe On: Apple Podcasts | Spotify

This episode was recorded in June 2026.

Tim Colyer

Hello and welcome to another episode of Future Forces in Asia Pacific Banking. In each episode, we will highlight a unique perspective on challenges and opportunities in this dynamic region. 

On February 28 this year, the US launched a military attack on Iran. Within days, Iran’s retaliations had closed the Strait of Hormuz. Oil prices had gone to over $100. Oil supply was reduced pretty quickly. Asia's countries had to respond with reduced economic activity, four-day working weeks, work-from-home mandates, and the economic ripples continue to this day. 

At the risk of being hostage to fortune, we're talking at 5:36 PM on June 19. Today we're going to be talking about the interrelationship between the energy sector and banking. 

I have with me today my very good friend and colleague, Abhi Bhuchar, who leads Oliver Wyman’s energy practice in Asia Pacific. Abhi and I have known each other for a long time, often heatedly on opposite sides of the same debate. Today, I really wanted to get into what's going on in the energy sector. Why is that important to financial services, and what should we be thinking about in the finance sector about how we respond to the continued volatility in the energy markets? 

So, why is that important? Energy's been a central macro theme over the last few years. If I think back through the conversations that we've had, probably our first big debate was on what's going to happen from COVID-19. During COVID-19, we saw one of the big things was that oil prices went through the floor, memorably hit minus $47 a barrel at some point in May of 2020. 

Next big major shock, the Ukraine war of 2022, where oil and gas prices went up a lot. We saw major impact on inflation, a knock-on impact on interest rates. And now, of course, with the Iran war, a big impact on oil prices, but also what we were all expecting, which was falling interest rates going into reverse as the world started to worry about inflation again. This is super important. Abhi, just to start us off, where do you see the overall state of the energy sector today in 2026? 

Abhi Bhuchar

Thanks, Tim. I guess I’d best characterize it as stressed but resilient. You did a good job of laying out the ‘in the moment’ crisis, and I think a bunch of us tend to suffer from recency bias and we over-index on what's happening in the here and the now, all of which you've represented: economic pressures, particularly in the jurisdictions you and I tend to work a lot in, real impact on businesses and peoples and households and government balance sheets. But if you zoom out a little bit, it could have been a lot worse. 

I recognize I’m arguing the counterfactual, but it has been borne out that you haven't seen economic activity come to a grinding halt, which was candidly my big worry coming into this crisis, that the sheer mode of production is at threat. Hence, I use the point of resilience, which the industry has clearly built in conjunction with other stakeholders, to make sure that does not ripple through the economy at a multiplier effect. 

Now, how has that happened? I think again, just taking the aperture out a little bit, we talk a lot about oil and gas, which is the constraining or constrained factor out of the Strait, but there's been a whole mode of other energy forms and assets that have gone in through governmental action, private capital action, and so on and so forth. Again, in this full range of economies that we tend to work in – solar, wind – we are hearing murmurs of nuclear, even in Southeast Asia – all of that leads me to believe that the system will hold, as it were. 

Tim

One of the things I think is interesting, and we can debate whether it's accidental or a feature, is that during this period of frequent energy shocks, we’re also in the middle of an energy transition, albeit slowly, and we should debate how slowly, from fossil fuels to renewables. How much do you think that is a contributing factor, and how have the shocks been different because of the energy transition than they might have been if this were happening 20 or 30 years ago? 

Abhi

It's something I’ve wrestled with individually, as well as with clients, and it's really interesting [to hear] the perspectives out there. Let me try and condense what I think of the situation. 

To my point earlier, [the energy transition] is helping manage the shock, but in terms of the shocks themselves, I know there are a bunch of folks out there with bigger worldviews than mine who talk about how geopolitics and the energy sector have forever been intertwined. And that's a statement of fact. But how shifting political powers are both a consequence of and a result of the energy transition. 

You and I were talking about this earlier – China championing renewables, Europe having an appetite for renewables but also needing a fundamental baseload of fossil fuels to keep the economy going, and the Americans becoming the largest exporters of fossil fuels. There is a dynamic there that is without a doubt playing through geopolitics, and if energy as an ecosystem is anything, it is a manifestation of geopolitics. 

So, for me, the cause-and-effect requires some scratching of the surface, more than I suspect we can do in a 20-minute conversation, but beyond that, what’s also clear is that countries are recognizing the energy transition could be a way of gaining more control of their own destiny. It'd be really interesting to see how governments look past the fog of war that exists right now, where they need to secure the molecule and actually move the debate to “okay, we got the molecule, or we will find the molecules for the short-term, but does this mean we approach energy transition any differently than we had in the past?” 

Tim

Yeah, one of the really interesting things we have seen recently is the cognitive dissonance of the response to the Iran war, because I see the discussion going in two seemingly opposite directions, which is, we're reminded of the energy security issues of being dependent on importing oil and gas from other countries. 

So, on the one hand, we need to secure other sources of oil and gas, and if we have any way of producing them ourselves, which many countries in Asia do, we need to increase production. That's one way that seemingly goes against the energy transition. On the other hand, we don't really want an energy system that is dependent on these fossil fuels at all, so we need to build up our renewable energy suppliers, so that we can wean ourselves off a source of energy on which we're dependent on other countries. 

Do you see those as mutually contradictory? Do you think one side or the other is going to win that debate, or do you really think both of those forces are playing out at the same time? 

Abhi

This is wishful thinking, and what I'm seeing on the ground, is: they both have to play out. We will likely run into a period over the next, I don’t know, pick a time horizon – one, two years – of where we will need to recover economically. It’s more tempting to invest in using existing machinery, more in the direction of fossil fuels, as opposed to big investments in renewable energy, which bring their own downstream investments you need to make. 

Simultaneously to your point of “I can control, and renewables allow me to achieve more than one ambition at the same time”, invariably, the conversation will get dragged there. [So it’s] a combination of optimism, and I'm seeing actual corporate clients, maybe less governments, who are engaging in that exact debate right now – do I need to set up, as an example, a regasification terminal for receiving terminal energy, which is going to [cost] hundreds of millions of dollars, if not billions of dollars, but a lifespan of 50 years? Or are gas and batteries the more compelling proposition right now, given the direction of travel?

Tim

Yeah, and very difficult when many of these investments are, as you say, multi-decade payoffs. I need to invest now, but I might not get the oil and gas online until 2040, and will I still need it when I get there? 

Abhi

What worries me, candidly, on one side of the debate, is that we're talking about the geopolitical lace through the energy sector. At some point we have to touch the AI element of this, right? The hunger for energy for data centers hasn't yet hit the shores of Asia the way it has hit the shores of North America. That becomes so tempting to jump on that, and what's the best way or shortest-term way to jump on that?

Tim

If I try and translate that into what does this all mean for oil prices, I’ll feed you my immediate reaction to the war in Iran in March, which I think is a US attempt to secure a broader energy supply of oil, force down the price of oil, and have cheap energy prices across the world. Now that hasn’t played out obviously, but if we’re going to be in a world where there'll be periods where there's uncertain supply and therefore every country is increasing its supply simultaneously, and also a period where the demand for that is potentially decreasing because of replacement with renewables, potentially increasing because of the increased demand from their data centres, does that mean we necessarily will have periods of time where supply and demand are totally out of whack and, as a result, expect much more volatile oil prices? 

Could we see a repeat of a 2020 COVID-19 style, where we no longer have a supply shock, but we’ve built the supply as if we did? We don't have the storage, oil prices go down, and we end up in the same wildly fluctuating price environment. 

Abhi

It's an interesting framing. Candidly, at a system level, I'm not sure it would manifest itself that way, because at the end of the day, every incremental project that you add into the system, from a supply standpoint, is still being done at an individual decision level and therefore the individual capital holders are making that choice of ‘do we go long or not?’ 

I mean, we've engaged in this debate with clients as well – do you see a transition that takes chunks out of the supply or demand, or are you more likely to see it erode over a period of time? Recognizing that the reverse of it is true, also that you cannot take a project down from 70% to 65% to 50%, these projects are not a sliding scale; they will go off because they're out of the cost curve. So, this is my view, I don't think the energy transition in itself results in a more volatile outcome from a pricing standpoint, certainly. 

What is likely to happen, though, is that different holders of different types or pools of capital and assets will likely be making those decisions individually or in silos, and that may result in more micro pockets of volatility, if you will. Take an example, a jurisdiction running a gas-fired power plant and suddenly realizes they’re over capacity on the generation side, do they shut down the gas-fired power plant, which takes a chunk of production out? This is quite an esoteric and out-there example, but it illustrates the point that in more micro segments, I suspect you’ll see that, but given how globally integrated the system tends to be, I don't think that the cause-and-effect will play out that way. But you and I have been known to take different positions. 

Tim

The adage that the answer to low oil prices is low oil prices because the market automatically corrects itself. I do have this concern that because we're in a transition, and at the same time, we have this very two-directional policy response that lends itself to a more volatile set of supply and demand imbalances than we would have in a more predictable transition and in a more predictable economic situation. 

I guess we should then talk a little bit about net zero and what this means for banks. One of the big trends of the early part of the 2020s was a big political consensus around the need to address climate change. A lot of scenarios were looking at what it would mean to get to net zero by 2050, and in the financial sector and the banking sector that we're talking about today, a lot of banks – including those in Asia Pacific – signed up to ambitious commitments across sectors to reduce emissions intensity or reduce emissions of their financing. 

Six years on – I’m interested in your view, and then I'll give you mine – how smart does that [approach] look? Do you think that approach still holds, that this was a sound investment thesis that we should stick with? Or do you think there's a need to adjust course? 

Abhi

It is really tempting to use the information we have today to judge our behavior six years ago. I'm going to try and avoid falling into that trap. I think six years ago it was necessary. It was necessary for different sectors and actors to take a position, to push forward in ambiguity, because otherwise we would have this dance between regulators, governments, private capital, and banks, and everybody was like, you go first, you go first, you go first. Knowing what we knew then, I think it was necessary. 

Fast forward six years, yes, we do now have more information, so is there a need to look at those playbooks again? I’m going to talk about this from an industrial standpoint. I'd love to hear your reflections on this as someone who works with banks. 

I do think there is a need to look at that book, or that approach rather, particularly in the context of Asia. What we are learning is that economic pressures, short-term or medium-term, on regulators and governments mean that some of those assumed commitments and risk hedges, if I can call it that, through policy have not quite played out at the [intended] pace. And this is not just in Asia – just to be clear, I think other jurisdictions have also kind of slowed it down, taken a slight left turn at T2, whatever you want to call it. So, we now know more. I think the broader capital deployment ecosystem needs to review that information and decide the right way forward. 

From an industrial standpoint, I will say this: the appetite to invest is not dulled, right? There is economic opportunity similarly hedged by regulators who do need to step in, or governments do need to step in, because, save this crisis, SAF and mineral diesel were not competitively priced for airlines. You did need some kind of support, but there was still a lot of capital, as they say, at the gates waiting to be deployed. I think it may have shrunk; that pool may have shrunk in the short term, but it is still there. There are a bunch of entities that I know that are still constantly asking the question, in fact, going back to your question of, does this actually signal an increased appetite for renewables and energy transition? So, having said what I have, I'd love to hear what you think of, again, in that moment versus today.  

Tim

Yeah, and I personally spent a lot of my time over those years helping banks to think through exactly this question and to set those targets. What's marked is that through these crises and through the marked change in policy narrative, if not necessarily actually in policy, banks have largely stuck to their commitments and a lot of them are largely still in line with the majority of their commitments as well. They're not abandoning their net-zero commitments, and most of that is because they don't feel any need to do so. My sense is that there were some things that we've learned, where we were probably lacking nuance when this was first done that we can refine, but that doesn't mean that we need to abandon the commitment to net zero altogether. 

I agree with you on the fact that the commitments made by the financial sector as a whole set a certain degree of investment certainty for real economy companies that were thinking, “Is it going to be worth me making this 20-year investment in battery storage?” Well, if the top 130 banks in the world think so, I probably have more confidence that I'm going to be able to finance this and stay the course. 

Where I think there is probably a need to rethink is some of the hard-to-abate sectors; those early scenarios were a little over optimistic about how quickly we could make progress. You highlighted things like SAF, green hydrogen, green cement, et cetera. Those are just proving to be more difficult or slower than we might have hoped to turn. Also in the oil and gas sector, there was an ambition that we could simultaneously change the demand for energy through renewable energy, and that would lead to a straight-line reduction in oil and gas demand, and we are not seeing that. It does not make sense, particularly in this world of geopolitical uncertainty, to be turning off the oil and gas supply before you've changed the demand for it on the other side. I feel like there's a need for a tweak, but not to throw the baby out with the bath water. Rarely and unusually, you and I actually agree on this, so that's encouraging. 

Let's talk a bit about Iran. What I'm interested in is your view specifically in the region that we’re in – in Asia and we're talking in Singapore here – how has the Iran conflict played out in the economy, and how has it played out on the energy players that are in our market that may be having a different experience to some of the big international oil and gas companies that gained a lot from the increased oil prices? 

Abhi

Yeah, so what has happened on the ground, given we are in an energy-importing part of the world, where most of the oil and gas companies are what we’d call downstream. It's been quite a shock to those economic and financial systems. Some of it, because the individual governments play a big role in these systems in these economies, has reverberated through those government constructs, whether it's foreign currency reserves or FX rates or whatever have you. There has been a significant shock. You talked about some of the demand side controls that the government has tried to put in place, and that's the contrast between some of the big international names who are generally of the producing variety, or at least their balance sheet is over-indexed to the upstream, not to say they don't have downstream. Depending on where their assets are, it's been a relatively productive time for them to be in business. 

I think the other thing that's happening that I talked about is [the industry being] stressed but resilient. There's a whole new set of debates happening on how to continue to build resilience. One manifestation of it is the energy transition, or just different forms of energy, but the other is whether we need to build new logistics infrastructure? I suspect that in closed rooms somewhere are discussions of national reserves, right? These are the prudent conversations that different people will be having. 

So to me, those are two or three different ways it's being manifested, as to what it looks like in six months’ time, I guess again, kind of a health warning of where we are, June 19, 5:45 p.m. At some point earlier today, ships were going through the Strait and I don't think they are anymore. I don't know. My money is squarely in my pocket right now. 

Tim

Yeah, very interesting. Also, how much damage do you think is already done? The supply has been shrunk, and the prices have been higher for a sustained period of time. Even in our best-case scenario, where the Strait of Hormuz opens quickly and stays open, it takes time for that supply to come back on board. How quickly can we get back to normal, and how much damage do you think has already been done by this?  

Abhi

How quickly we can get back to normal is a difficult question to answer because it depends on the free flow of molecules and access to that. What I worry more about though, candidly, is that forex rates and interest rates are harder things to unwind because no single body is in control of those, right? The market tells you that. Invariably, the market will find other reasons, just as an example, why the IDR (Indonesian Rupiah) is where it is today or why it has trended that way. So, that's a really hard bit to go back to February 24th , 25th , 26th, whatever it is. That's one. 

The second is, I do worry that we may not have seen the entire manifestation of the crisis quite yet, because governments have had to write checks to protect people and societies and businesses over the past few months. Those checks will come due at some point. I don't know if they’d manifest themselves in different business confidence levels. There have been all kinds of interventions that make me worry, make me hesitant. 

Tim

I guess this is not the first time that governments have had to step in in the last few years either. This link from geopolitics or global pandemics into an enormous need for government responses, into weakening of government balance sheets, is definitely a watch point. And again, that’s not an Asia Pacific-only commentary; that’s a global concern at the moment. 

Abhi

But for you, given that governments tend to play a disproportionate role, either directly or indirectly, in the ownership of financial institutions in this part of the world, how should these banking systems be thinking about responding to either a recovery, or dare I say, a worsening of what's happening in their markets? 

Tim

I think for me, the reason I wanted to highlight this for the banking sector is that we really see three major impacts here. One is risk management. Over the last several years, we’ve found that we need to have very specific, detailed bottom-up management of credit around an event that is hitting our clients in a very asymmetric way, often related to energy prices. That muscle of understanding on how an event affects my clients, how I serve them to get through this crisis, but also what the credit implications are for me as a bank, has been something we’ve all had to build. My sense is that that’s a muscle we’re going to need to use regularly over the next few years. This is not a one-off and is now done. 

The second is the broader macroeconomic implications. Energy shocks have often been a big part of the inflation shock, which has then fed into interest rates. Higher interest rates, also volatile interest rates, mean we’re in a different rate paradigm in the 2020s than we were in the lower-for-longer environment of the 2010s. In many ways, [this is] better because higher interest rates are better for the banking sector than lower interest rates, but keeping track with our commercial businesses and pricing of a more volatile interest rate environment is a challenge. I think [building] treasury functions that are much more nimble is a big part of it. 

The third one is, what are my investment theses and where am I putting my money? Where am I deploying my capital? Energy is a big consumer of bank capital. I need to have a view on whether I am building a team that is looking at renewable energy and a capability to deploy money to renewable energy, or am I building a capability to deploy to oil and gas? Do I want to go back and support companies to do coal because that becomes a hedge against geopolitical risk around gas supplies? I think those questions are really big for corporate banks around the region. To your point, that’s not disconnected from the policy debate when you’re in a region where a lot of the banks are indirectly or directly state-owned and therefore supporting the national policy agenda. 

Abhi

Interesting parallels, right? Same with the energy system. We advise clients that you’ve got to build up a muscle of risk management, both long term because you’re deploying such big pots of capital in an environment where you don’t know what 15 years from now looks like, but also in the short term with commodity prices going up and down – how do you hedge or not, and how do you make those thoughtful decisions? 

Tim

I think these themes of managing through wider and more frequent volatile cycles, building your business for resilience, and also seeing through the noise to the long-term investment thesis, those are going to be critical in both of our industries over the next few years.

Okay. I'm going to bring this to a close with a few quick-fire questions. We’re going to be hostage to fortune. We’re going to make some predictions that are going to be totally wrong, but it’ll be fun anyway. So first one, end of the year, what’s the oil price going to be? 

Abhi

42. 

Tim

Okay, that was easy, 42. Second one. The next six months. How many of those is the Strait of Hormuz going to be open for? 

Abhi

42. [laughs] I think you’ve known me long enough to know I am not going to—I just would not know how to guess.  

Tim

Abhi’s commitment to the Hitchhiker's Guide to the Galaxy remains undimmed. Abhi, thank you very much for joining us. Hopefully, everybody found that interesting.  I do think this connection between banking and energy is one to watch. Thank you very much.  

Abhi

Thank you.

This transcript has been edited for clarity.

Abhi Bhuchar leads Oliver Wyman's Energy and Natural Resources practice and the firm's Southeast Asia business. Based in Singapore, he has over 20 years of industry and consulting experience, advising clients on business and asset valuation, as well as commercial and operational effectiveness. He is passionate about creating meaningful impact and seeing how his work improves outcomes for businesses and the people they serve.

With a background in engineering, Abhi brings a structured, practical lens to problem-solving. Having lived and worked across North America, the Middle East, the UK, and Southeast Asia, he connects easily with clients from a wide range of backgrounds and brings a global perspective to every engagement.

Oliver Wyman Partner and Head of Financial Services, Southeast Asia, Tim Colyer, is based in Singapore. He leads the firm’s Financial Services work in Southeast Asia.

Tim joined Oliver Wyman in London in 2004 and has been based in Southeast Asia since 2017, working with banks across the region. He helps financial services clients address complex challenges that require technical expertise and strategic change, with a particular focus on transition finance and the role banks can play in supporting the shift to net zero.

Energy has become one of the defining forces shaping banking across Asia Pacific. Oil price spikes, the closure of the Strait of Hormuz, and swings in inflation and interest rates are flowing directly into how banks manage credit risk, price their balance sheets, and allocate capital. At the same time, the shift to renewables is redrawing the investment map, forcing banks to decide where to deploy financing across old and new energy sources.

In this episode of Future forces in Asia-Pacific banking, host Tim Colyer is joined by Abhi Bhuchar, Oliver Wyman's Head of Energy and Natural Resources, Asia Pacific, to unpack why the energy system has stayed resilient through repeated shocks and where the next pockets of volatility may emerge. The conversation also looks at whether banks' net-zero playbooks, set several years ago, still hold up given what the industry has learned since, particularly for hard-to-abate sectors and oil and gas financing.  

The discussion concludes with a practical look at what this all means for banks, from bottom-up credit risk management to treasury agility and decisions about where to deploy capital across renewables, oil and gas, and coal.

Key talking points:

• How geopolitical shocks and energy-price volatility flow through inflation, interest rates, currencies, and credit risk.
• Why energy security and the energy transition are advancing in parallel across Asia-Pacific, rather than being mutually contradictory.
• Where banks may need to refine net-zero commitments, especially for hard-to-abate sectors and oil and gas.
• How banks can strengthen risk management, treasury agility, and investment capabilities for a more volatile energy system.

This episode is part of our Future forces in Asia-Pacific banking series, which examines the trends, technologies, regulations, business models, and leadership decisions shaping the future of financial services across the Asia-Pacific. The series features conversations with industry experts to unpack the ideas and developments that matter most to senior banking executives.

Subscribe On: Apple Podcasts | Spotify

This episode was recorded in June 2026.

Tim Colyer

Hello and welcome to another episode of Future Forces in Asia Pacific Banking. In each episode, we will highlight a unique perspective on challenges and opportunities in this dynamic region. 

On February 28 this year, the US launched a military attack on Iran. Within days, Iran’s retaliations had closed the Strait of Hormuz. Oil prices had gone to over $100. Oil supply was reduced pretty quickly. Asia's countries had to respond with reduced economic activity, four-day working weeks, work-from-home mandates, and the economic ripples continue to this day. 

At the risk of being hostage to fortune, we're talking at 5:36 PM on June 19. Today we're going to be talking about the interrelationship between the energy sector and banking. 

I have with me today my very good friend and colleague, Abhi Bhuchar, who leads Oliver Wyman’s energy practice in Asia Pacific. Abhi and I have known each other for a long time, often heatedly on opposite sides of the same debate. Today, I really wanted to get into what's going on in the energy sector. Why is that important to financial services, and what should we be thinking about in the finance sector about how we respond to the continued volatility in the energy markets? 

So, why is that important? Energy's been a central macro theme over the last few years. If I think back through the conversations that we've had, probably our first big debate was on what's going to happen from COVID-19. During COVID-19, we saw one of the big things was that oil prices went through the floor, memorably hit minus $47 a barrel at some point in May of 2020. 

Next big major shock, the Ukraine war of 2022, where oil and gas prices went up a lot. We saw major impact on inflation, a knock-on impact on interest rates. And now, of course, with the Iran war, a big impact on oil prices, but also what we were all expecting, which was falling interest rates going into reverse as the world started to worry about inflation again. This is super important. Abhi, just to start us off, where do you see the overall state of the energy sector today in 2026? 

Abhi Bhuchar

Thanks, Tim. I guess I’d best characterize it as stressed but resilient. You did a good job of laying out the ‘in the moment’ crisis, and I think a bunch of us tend to suffer from recency bias and we over-index on what's happening in the here and the now, all of which you've represented: economic pressures, particularly in the jurisdictions you and I tend to work a lot in, real impact on businesses and peoples and households and government balance sheets. But if you zoom out a little bit, it could have been a lot worse. 

I recognize I’m arguing the counterfactual, but it has been borne out that you haven't seen economic activity come to a grinding halt, which was candidly my big worry coming into this crisis, that the sheer mode of production is at threat. Hence, I use the point of resilience, which the industry has clearly built in conjunction with other stakeholders, to make sure that does not ripple through the economy at a multiplier effect. 

Now, how has that happened? I think again, just taking the aperture out a little bit, we talk a lot about oil and gas, which is the constraining or constrained factor out of the Strait, but there's been a whole mode of other energy forms and assets that have gone in through governmental action, private capital action, and so on and so forth. Again, in this full range of economies that we tend to work in – solar, wind – we are hearing murmurs of nuclear, even in Southeast Asia – all of that leads me to believe that the system will hold, as it were. 

Tim

One of the things I think is interesting, and we can debate whether it's accidental or a feature, is that during this period of frequent energy shocks, we’re also in the middle of an energy transition, albeit slowly, and we should debate how slowly, from fossil fuels to renewables. How much do you think that is a contributing factor, and how have the shocks been different because of the energy transition than they might have been if this were happening 20 or 30 years ago? 

Abhi

It's something I’ve wrestled with individually, as well as with clients, and it's really interesting [to hear] the perspectives out there. Let me try and condense what I think of the situation. 

To my point earlier, [the energy transition] is helping manage the shock, but in terms of the shocks themselves, I know there are a bunch of folks out there with bigger worldviews than mine who talk about how geopolitics and the energy sector have forever been intertwined. And that's a statement of fact. But how shifting political powers are both a consequence of and a result of the energy transition. 

You and I were talking about this earlier – China championing renewables, Europe having an appetite for renewables but also needing a fundamental baseload of fossil fuels to keep the economy going, and the Americans becoming the largest exporters of fossil fuels. There is a dynamic there that is without a doubt playing through geopolitics, and if energy as an ecosystem is anything, it is a manifestation of geopolitics. 

So, for me, the cause-and-effect requires some scratching of the surface, more than I suspect we can do in a 20-minute conversation, but beyond that, what’s also clear is that countries are recognizing the energy transition could be a way of gaining more control of their own destiny. It'd be really interesting to see how governments look past the fog of war that exists right now, where they need to secure the molecule and actually move the debate to “okay, we got the molecule, or we will find the molecules for the short-term, but does this mean we approach energy transition any differently than we had in the past?” 

Tim

Yeah, one of the really interesting things we have seen recently is the cognitive dissonance of the response to the Iran war, because I see the discussion going in two seemingly opposite directions, which is, we're reminded of the energy security issues of being dependent on importing oil and gas from other countries. 

So, on the one hand, we need to secure other sources of oil and gas, and if we have any way of producing them ourselves, which many countries in Asia do, we need to increase production. That's one way that seemingly goes against the energy transition. On the other hand, we don't really want an energy system that is dependent on these fossil fuels at all, so we need to build up our renewable energy suppliers, so that we can wean ourselves off a source of energy on which we're dependent on other countries. 

Do you see those as mutually contradictory? Do you think one side or the other is going to win that debate, or do you really think both of those forces are playing out at the same time? 

Abhi

This is wishful thinking, and what I'm seeing on the ground, is: they both have to play out. We will likely run into a period over the next, I don’t know, pick a time horizon – one, two years – of where we will need to recover economically. It’s more tempting to invest in using existing machinery, more in the direction of fossil fuels, as opposed to big investments in renewable energy, which bring their own downstream investments you need to make. 

Simultaneously to your point of “I can control, and renewables allow me to achieve more than one ambition at the same time”, invariably, the conversation will get dragged there. [So it’s] a combination of optimism, and I'm seeing actual corporate clients, maybe less governments, who are engaging in that exact debate right now – do I need to set up, as an example, a regasification terminal for receiving terminal energy, which is going to [cost] hundreds of millions of dollars, if not billions of dollars, but a lifespan of 50 years? Or are gas and batteries the more compelling proposition right now, given the direction of travel?

Tim

Yeah, and very difficult when many of these investments are, as you say, multi-decade payoffs. I need to invest now, but I might not get the oil and gas online until 2040, and will I still need it when I get there? 

Abhi

What worries me, candidly, on one side of the debate, is that we're talking about the geopolitical lace through the energy sector. At some point we have to touch the AI element of this, right? The hunger for energy for data centers hasn't yet hit the shores of Asia the way it has hit the shores of North America. That becomes so tempting to jump on that, and what's the best way or shortest-term way to jump on that?

Tim

If I try and translate that into what does this all mean for oil prices, I’ll feed you my immediate reaction to the war in Iran in March, which I think is a US attempt to secure a broader energy supply of oil, force down the price of oil, and have cheap energy prices across the world. Now that hasn’t played out obviously, but if we’re going to be in a world where there'll be periods where there's uncertain supply and therefore every country is increasing its supply simultaneously, and also a period where the demand for that is potentially decreasing because of replacement with renewables, potentially increasing because of the increased demand from their data centres, does that mean we necessarily will have periods of time where supply and demand are totally out of whack and, as a result, expect much more volatile oil prices? 

Could we see a repeat of a 2020 COVID-19 style, where we no longer have a supply shock, but we’ve built the supply as if we did? We don't have the storage, oil prices go down, and we end up in the same wildly fluctuating price environment. 

Abhi

It's an interesting framing. Candidly, at a system level, I'm not sure it would manifest itself that way, because at the end of the day, every incremental project that you add into the system, from a supply standpoint, is still being done at an individual decision level and therefore the individual capital holders are making that choice of ‘do we go long or not?’ 

I mean, we've engaged in this debate with clients as well – do you see a transition that takes chunks out of the supply or demand, or are you more likely to see it erode over a period of time? Recognizing that the reverse of it is true, also that you cannot take a project down from 70% to 65% to 50%, these projects are not a sliding scale; they will go off because they're out of the cost curve. So, this is my view, I don't think the energy transition in itself results in a more volatile outcome from a pricing standpoint, certainly. 

What is likely to happen, though, is that different holders of different types or pools of capital and assets will likely be making those decisions individually or in silos, and that may result in more micro pockets of volatility, if you will. Take an example, a jurisdiction running a gas-fired power plant and suddenly realizes they’re over capacity on the generation side, do they shut down the gas-fired power plant, which takes a chunk of production out? This is quite an esoteric and out-there example, but it illustrates the point that in more micro segments, I suspect you’ll see that, but given how globally integrated the system tends to be, I don't think that the cause-and-effect will play out that way. But you and I have been known to take different positions. 

Tim

The adage that the answer to low oil prices is low oil prices because the market automatically corrects itself. I do have this concern that because we're in a transition, and at the same time, we have this very two-directional policy response that lends itself to a more volatile set of supply and demand imbalances than we would have in a more predictable transition and in a more predictable economic situation. 

I guess we should then talk a little bit about net zero and what this means for banks. One of the big trends of the early part of the 2020s was a big political consensus around the need to address climate change. A lot of scenarios were looking at what it would mean to get to net zero by 2050, and in the financial sector and the banking sector that we're talking about today, a lot of banks – including those in Asia Pacific – signed up to ambitious commitments across sectors to reduce emissions intensity or reduce emissions of their financing. 

Six years on – I’m interested in your view, and then I'll give you mine – how smart does that [approach] look? Do you think that approach still holds, that this was a sound investment thesis that we should stick with? Or do you think there's a need to adjust course? 

Abhi

It is really tempting to use the information we have today to judge our behavior six years ago. I'm going to try and avoid falling into that trap. I think six years ago it was necessary. It was necessary for different sectors and actors to take a position, to push forward in ambiguity, because otherwise we would have this dance between regulators, governments, private capital, and banks, and everybody was like, you go first, you go first, you go first. Knowing what we knew then, I think it was necessary. 

Fast forward six years, yes, we do now have more information, so is there a need to look at those playbooks again? I’m going to talk about this from an industrial standpoint. I'd love to hear your reflections on this as someone who works with banks. 

I do think there is a need to look at that book, or that approach rather, particularly in the context of Asia. What we are learning is that economic pressures, short-term or medium-term, on regulators and governments mean that some of those assumed commitments and risk hedges, if I can call it that, through policy have not quite played out at the [intended] pace. And this is not just in Asia – just to be clear, I think other jurisdictions have also kind of slowed it down, taken a slight left turn at T2, whatever you want to call it. So, we now know more. I think the broader capital deployment ecosystem needs to review that information and decide the right way forward. 

From an industrial standpoint, I will say this: the appetite to invest is not dulled, right? There is economic opportunity similarly hedged by regulators who do need to step in, or governments do need to step in, because, save this crisis, SAF and mineral diesel were not competitively priced for airlines. You did need some kind of support, but there was still a lot of capital, as they say, at the gates waiting to be deployed. I think it may have shrunk; that pool may have shrunk in the short term, but it is still there. There are a bunch of entities that I know that are still constantly asking the question, in fact, going back to your question of, does this actually signal an increased appetite for renewables and energy transition? So, having said what I have, I'd love to hear what you think of, again, in that moment versus today.  

Tim

Yeah, and I personally spent a lot of my time over those years helping banks to think through exactly this question and to set those targets. What's marked is that through these crises and through the marked change in policy narrative, if not necessarily actually in policy, banks have largely stuck to their commitments and a lot of them are largely still in line with the majority of their commitments as well. They're not abandoning their net-zero commitments, and most of that is because they don't feel any need to do so. My sense is that there were some things that we've learned, where we were probably lacking nuance when this was first done that we can refine, but that doesn't mean that we need to abandon the commitment to net zero altogether. 

I agree with you on the fact that the commitments made by the financial sector as a whole set a certain degree of investment certainty for real economy companies that were thinking, “Is it going to be worth me making this 20-year investment in battery storage?” Well, if the top 130 banks in the world think so, I probably have more confidence that I'm going to be able to finance this and stay the course. 

Where I think there is probably a need to rethink is some of the hard-to-abate sectors; those early scenarios were a little over optimistic about how quickly we could make progress. You highlighted things like SAF, green hydrogen, green cement, et cetera. Those are just proving to be more difficult or slower than we might have hoped to turn. Also in the oil and gas sector, there was an ambition that we could simultaneously change the demand for energy through renewable energy, and that would lead to a straight-line reduction in oil and gas demand, and we are not seeing that. It does not make sense, particularly in this world of geopolitical uncertainty, to be turning off the oil and gas supply before you've changed the demand for it on the other side. I feel like there's a need for a tweak, but not to throw the baby out with the bath water. Rarely and unusually, you and I actually agree on this, so that's encouraging. 

Let's talk a bit about Iran. What I'm interested in is your view specifically in the region that we’re in – in Asia and we're talking in Singapore here – how has the Iran conflict played out in the economy, and how has it played out on the energy players that are in our market that may be having a different experience to some of the big international oil and gas companies that gained a lot from the increased oil prices? 

Abhi

Yeah, so what has happened on the ground, given we are in an energy-importing part of the world, where most of the oil and gas companies are what we’d call downstream. It's been quite a shock to those economic and financial systems. Some of it, because the individual governments play a big role in these systems in these economies, has reverberated through those government constructs, whether it's foreign currency reserves or FX rates or whatever have you. There has been a significant shock. You talked about some of the demand side controls that the government has tried to put in place, and that's the contrast between some of the big international names who are generally of the producing variety, or at least their balance sheet is over-indexed to the upstream, not to say they don't have downstream. Depending on where their assets are, it's been a relatively productive time for them to be in business. 

I think the other thing that's happening that I talked about is [the industry being] stressed but resilient. There's a whole new set of debates happening on how to continue to build resilience. One manifestation of it is the energy transition, or just different forms of energy, but the other is whether we need to build new logistics infrastructure? I suspect that in closed rooms somewhere are discussions of national reserves, right? These are the prudent conversations that different people will be having. 

So to me, those are two or three different ways it's being manifested, as to what it looks like in six months’ time, I guess again, kind of a health warning of where we are, June 19, 5:45 p.m. At some point earlier today, ships were going through the Strait and I don't think they are anymore. I don't know. My money is squarely in my pocket right now. 

Tim

Yeah, very interesting. Also, how much damage do you think is already done? The supply has been shrunk, and the prices have been higher for a sustained period of time. Even in our best-case scenario, where the Strait of Hormuz opens quickly and stays open, it takes time for that supply to come back on board. How quickly can we get back to normal, and how much damage do you think has already been done by this?  

Abhi

How quickly we can get back to normal is a difficult question to answer because it depends on the free flow of molecules and access to that. What I worry more about though, candidly, is that forex rates and interest rates are harder things to unwind because no single body is in control of those, right? The market tells you that. Invariably, the market will find other reasons, just as an example, why the IDR (Indonesian Rupiah) is where it is today or why it has trended that way. So, that's a really hard bit to go back to February 24th , 25th , 26th, whatever it is. That's one. 

The second is, I do worry that we may not have seen the entire manifestation of the crisis quite yet, because governments have had to write checks to protect people and societies and businesses over the past few months. Those checks will come due at some point. I don't know if they’d manifest themselves in different business confidence levels. There have been all kinds of interventions that make me worry, make me hesitant. 

Tim

I guess this is not the first time that governments have had to step in in the last few years either. This link from geopolitics or global pandemics into an enormous need for government responses, into weakening of government balance sheets, is definitely a watch point. And again, that’s not an Asia Pacific-only commentary; that’s a global concern at the moment. 

Abhi

But for you, given that governments tend to play a disproportionate role, either directly or indirectly, in the ownership of financial institutions in this part of the world, how should these banking systems be thinking about responding to either a recovery, or dare I say, a worsening of what's happening in their markets? 

Tim

I think for me, the reason I wanted to highlight this for the banking sector is that we really see three major impacts here. One is risk management. Over the last several years, we’ve found that we need to have very specific, detailed bottom-up management of credit around an event that is hitting our clients in a very asymmetric way, often related to energy prices. That muscle of understanding on how an event affects my clients, how I serve them to get through this crisis, but also what the credit implications are for me as a bank, has been something we’ve all had to build. My sense is that that’s a muscle we’re going to need to use regularly over the next few years. This is not a one-off and is now done. 

The second is the broader macroeconomic implications. Energy shocks have often been a big part of the inflation shock, which has then fed into interest rates. Higher interest rates, also volatile interest rates, mean we’re in a different rate paradigm in the 2020s than we were in the lower-for-longer environment of the 2010s. In many ways, [this is] better because higher interest rates are better for the banking sector than lower interest rates, but keeping track with our commercial businesses and pricing of a more volatile interest rate environment is a challenge. I think [building] treasury functions that are much more nimble is a big part of it. 

The third one is, what are my investment theses and where am I putting my money? Where am I deploying my capital? Energy is a big consumer of bank capital. I need to have a view on whether I am building a team that is looking at renewable energy and a capability to deploy money to renewable energy, or am I building a capability to deploy to oil and gas? Do I want to go back and support companies to do coal because that becomes a hedge against geopolitical risk around gas supplies? I think those questions are really big for corporate banks around the region. To your point, that’s not disconnected from the policy debate when you’re in a region where a lot of the banks are indirectly or directly state-owned and therefore supporting the national policy agenda. 

Abhi

Interesting parallels, right? Same with the energy system. We advise clients that you’ve got to build up a muscle of risk management, both long term because you’re deploying such big pots of capital in an environment where you don’t know what 15 years from now looks like, but also in the short term with commodity prices going up and down – how do you hedge or not, and how do you make those thoughtful decisions? 

Tim

I think these themes of managing through wider and more frequent volatile cycles, building your business for resilience, and also seeing through the noise to the long-term investment thesis, those are going to be critical in both of our industries over the next few years.

Okay. I'm going to bring this to a close with a few quick-fire questions. We’re going to be hostage to fortune. We’re going to make some predictions that are going to be totally wrong, but it’ll be fun anyway. So first one, end of the year, what’s the oil price going to be? 

Abhi

42. 

Tim

Okay, that was easy, 42. Second one. The next six months. How many of those is the Strait of Hormuz going to be open for? 

Abhi

42. [laughs] I think you’ve known me long enough to know I am not going to—I just would not know how to guess.  

Tim

Abhi’s commitment to the Hitchhiker's Guide to the Galaxy remains undimmed. Abhi, thank you very much for joining us. Hopefully, everybody found that interesting.  I do think this connection between banking and energy is one to watch. Thank you very much.  

Abhi

Thank you.

This transcript has been edited for clarity.

Abhi Bhuchar leads Oliver Wyman's Energy and Natural Resources practice and the firm's Southeast Asia business. Based in Singapore, he has over 20 years of industry and consulting experience, advising clients on business and asset valuation, as well as commercial and operational effectiveness. He is passionate about creating meaningful impact and seeing how his work improves outcomes for businesses and the people they serve.

With a background in engineering, Abhi brings a structured, practical lens to problem-solving. Having lived and worked across North America, the Middle East, the UK, and Southeast Asia, he connects easily with clients from a wide range of backgrounds and brings a global perspective to every engagement.

Oliver Wyman Partner and Head of Financial Services, Southeast Asia, Tim Colyer, is based in Singapore. He leads the firm’s Financial Services work in Southeast Asia.

Tim joined Oliver Wyman in London in 2004 and has been based in Southeast Asia since 2017, working with banks across the region. He helps financial services clients address complex challenges that require technical expertise and strategic change, with a particular focus on transition finance and the role banks can play in supporting the shift to net zero.

Energy has become one of the defining forces shaping banking across Asia Pacific. Oil price spikes, the closure of the Strait of Hormuz, and swings in inflation and interest rates are flowing directly into how banks manage credit risk, price their balance sheets, and allocate capital. At the same time, the shift to renewables is redrawing the investment map, forcing banks to decide where to deploy financing across old and new energy sources.

In this episode of Future forces in Asia-Pacific banking, host Tim Colyer is joined by Abhi Bhuchar, Oliver Wyman's Head of Energy and Natural Resources, Asia Pacific, to unpack why the energy system has stayed resilient through repeated shocks and where the next pockets of volatility may emerge. The conversation also looks at whether banks' net-zero playbooks, set several years ago, still hold up given what the industry has learned since, particularly for hard-to-abate sectors and oil and gas financing.  

The discussion concludes with a practical look at what this all means for banks, from bottom-up credit risk management to treasury agility and decisions about where to deploy capital across renewables, oil and gas, and coal.

Key talking points:

• How geopolitical shocks and energy-price volatility flow through inflation, interest rates, currencies, and credit risk.
• Why energy security and the energy transition are advancing in parallel across Asia-Pacific, rather than being mutually contradictory.
• Where banks may need to refine net-zero commitments, especially for hard-to-abate sectors and oil and gas.
• How banks can strengthen risk management, treasury agility, and investment capabilities for a more volatile energy system.

This episode is part of our Future forces in Asia-Pacific banking series, which examines the trends, technologies, regulations, business models, and leadership decisions shaping the future of financial services across the Asia-Pacific. The series features conversations with industry experts to unpack the ideas and developments that matter most to senior banking executives.

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This episode was recorded in June 2026.

Tim Colyer

Hello and welcome to another episode of Future Forces in Asia Pacific Banking. In each episode, we will highlight a unique perspective on challenges and opportunities in this dynamic region. 

On February 28 this year, the US launched a military attack on Iran. Within days, Iran’s retaliations had closed the Strait of Hormuz. Oil prices had gone to over $100. Oil supply was reduced pretty quickly. Asia's countries had to respond with reduced economic activity, four-day working weeks, work-from-home mandates, and the economic ripples continue to this day. 

At the risk of being hostage to fortune, we're talking at 5:36 PM on June 19. Today we're going to be talking about the interrelationship between the energy sector and banking. 

I have with me today my very good friend and colleague, Abhi Bhuchar, who leads Oliver Wyman’s energy practice in Asia Pacific. Abhi and I have known each other for a long time, often heatedly on opposite sides of the same debate. Today, I really wanted to get into what's going on in the energy sector. Why is that important to financial services, and what should we be thinking about in the finance sector about how we respond to the continued volatility in the energy markets? 

So, why is that important? Energy's been a central macro theme over the last few years. If I think back through the conversations that we've had, probably our first big debate was on what's going to happen from COVID-19. During COVID-19, we saw one of the big things was that oil prices went through the floor, memorably hit minus $47 a barrel at some point in May of 2020. 

Next big major shock, the Ukraine war of 2022, where oil and gas prices went up a lot. We saw major impact on inflation, a knock-on impact on interest rates. And now, of course, with the Iran war, a big impact on oil prices, but also what we were all expecting, which was falling interest rates going into reverse as the world started to worry about inflation again. This is super important. Abhi, just to start us off, where do you see the overall state of the energy sector today in 2026? 

Abhi Bhuchar

Thanks, Tim. I guess I’d best characterize it as stressed but resilient. You did a good job of laying out the ‘in the moment’ crisis, and I think a bunch of us tend to suffer from recency bias and we over-index on what's happening in the here and the now, all of which you've represented: economic pressures, particularly in the jurisdictions you and I tend to work a lot in, real impact on businesses and peoples and households and government balance sheets. But if you zoom out a little bit, it could have been a lot worse. 

I recognize I’m arguing the counterfactual, but it has been borne out that you haven't seen economic activity come to a grinding halt, which was candidly my big worry coming into this crisis, that the sheer mode of production is at threat. Hence, I use the point of resilience, which the industry has clearly built in conjunction with other stakeholders, to make sure that does not ripple through the economy at a multiplier effect. 

Now, how has that happened? I think again, just taking the aperture out a little bit, we talk a lot about oil and gas, which is the constraining or constrained factor out of the Strait, but there's been a whole mode of other energy forms and assets that have gone in through governmental action, private capital action, and so on and so forth. Again, in this full range of economies that we tend to work in – solar, wind – we are hearing murmurs of nuclear, even in Southeast Asia – all of that leads me to believe that the system will hold, as it were. 

Tim

One of the things I think is interesting, and we can debate whether it's accidental or a feature, is that during this period of frequent energy shocks, we’re also in the middle of an energy transition, albeit slowly, and we should debate how slowly, from fossil fuels to renewables. How much do you think that is a contributing factor, and how have the shocks been different because of the energy transition than they might have been if this were happening 20 or 30 years ago? 

Abhi

It's something I’ve wrestled with individually, as well as with clients, and it's really interesting [to hear] the perspectives out there. Let me try and condense what I think of the situation. 

To my point earlier, [the energy transition] is helping manage the shock, but in terms of the shocks themselves, I know there are a bunch of folks out there with bigger worldviews than mine who talk about how geopolitics and the energy sector have forever been intertwined. And that's a statement of fact. But how shifting political powers are both a consequence of and a result of the energy transition. 

You and I were talking about this earlier – China championing renewables, Europe having an appetite for renewables but also needing a fundamental baseload of fossil fuels to keep the economy going, and the Americans becoming the largest exporters of fossil fuels. There is a dynamic there that is without a doubt playing through geopolitics, and if energy as an ecosystem is anything, it is a manifestation of geopolitics. 

So, for me, the cause-and-effect requires some scratching of the surface, more than I suspect we can do in a 20-minute conversation, but beyond that, what’s also clear is that countries are recognizing the energy transition could be a way of gaining more control of their own destiny. It'd be really interesting to see how governments look past the fog of war that exists right now, where they need to secure the molecule and actually move the debate to “okay, we got the molecule, or we will find the molecules for the short-term, but does this mean we approach energy transition any differently than we had in the past?” 

Tim

Yeah, one of the really interesting things we have seen recently is the cognitive dissonance of the response to the Iran war, because I see the discussion going in two seemingly opposite directions, which is, we're reminded of the energy security issues of being dependent on importing oil and gas from other countries. 

So, on the one hand, we need to secure other sources of oil and gas, and if we have any way of producing them ourselves, which many countries in Asia do, we need to increase production. That's one way that seemingly goes against the energy transition. On the other hand, we don't really want an energy system that is dependent on these fossil fuels at all, so we need to build up our renewable energy suppliers, so that we can wean ourselves off a source of energy on which we're dependent on other countries. 

Do you see those as mutually contradictory? Do you think one side or the other is going to win that debate, or do you really think both of those forces are playing out at the same time? 

Abhi

This is wishful thinking, and what I'm seeing on the ground, is: they both have to play out. We will likely run into a period over the next, I don’t know, pick a time horizon – one, two years – of where we will need to recover economically. It’s more tempting to invest in using existing machinery, more in the direction of fossil fuels, as opposed to big investments in renewable energy, which bring their own downstream investments you need to make. 

Simultaneously to your point of “I can control, and renewables allow me to achieve more than one ambition at the same time”, invariably, the conversation will get dragged there. [So it’s] a combination of optimism, and I'm seeing actual corporate clients, maybe less governments, who are engaging in that exact debate right now – do I need to set up, as an example, a regasification terminal for receiving terminal energy, which is going to [cost] hundreds of millions of dollars, if not billions of dollars, but a lifespan of 50 years? Or are gas and batteries the more compelling proposition right now, given the direction of travel?

Tim

Yeah, and very difficult when many of these investments are, as you say, multi-decade payoffs. I need to invest now, but I might not get the oil and gas online until 2040, and will I still need it when I get there? 

Abhi

What worries me, candidly, on one side of the debate, is that we're talking about the geopolitical lace through the energy sector. At some point we have to touch the AI element of this, right? The hunger for energy for data centers hasn't yet hit the shores of Asia the way it has hit the shores of North America. That becomes so tempting to jump on that, and what's the best way or shortest-term way to jump on that?

Tim

If I try and translate that into what does this all mean for oil prices, I’ll feed you my immediate reaction to the war in Iran in March, which I think is a US attempt to secure a broader energy supply of oil, force down the price of oil, and have cheap energy prices across the world. Now that hasn’t played out obviously, but if we’re going to be in a world where there'll be periods where there's uncertain supply and therefore every country is increasing its supply simultaneously, and also a period where the demand for that is potentially decreasing because of replacement with renewables, potentially increasing because of the increased demand from their data centres, does that mean we necessarily will have periods of time where supply and demand are totally out of whack and, as a result, expect much more volatile oil prices? 

Could we see a repeat of a 2020 COVID-19 style, where we no longer have a supply shock, but we’ve built the supply as if we did? We don't have the storage, oil prices go down, and we end up in the same wildly fluctuating price environment. 

Abhi

It's an interesting framing. Candidly, at a system level, I'm not sure it would manifest itself that way, because at the end of the day, every incremental project that you add into the system, from a supply standpoint, is still being done at an individual decision level and therefore the individual capital holders are making that choice of ‘do we go long or not?’ 

I mean, we've engaged in this debate with clients as well – do you see a transition that takes chunks out of the supply or demand, or are you more likely to see it erode over a period of time? Recognizing that the reverse of it is true, also that you cannot take a project down from 70% to 65% to 50%, these projects are not a sliding scale; they will go off because they're out of the cost curve. So, this is my view, I don't think the energy transition in itself results in a more volatile outcome from a pricing standpoint, certainly. 

What is likely to happen, though, is that different holders of different types or pools of capital and assets will likely be making those decisions individually or in silos, and that may result in more micro pockets of volatility, if you will. Take an example, a jurisdiction running a gas-fired power plant and suddenly realizes they’re over capacity on the generation side, do they shut down the gas-fired power plant, which takes a chunk of production out? This is quite an esoteric and out-there example, but it illustrates the point that in more micro segments, I suspect you’ll see that, but given how globally integrated the system tends to be, I don't think that the cause-and-effect will play out that way. But you and I have been known to take different positions. 

Tim

The adage that the answer to low oil prices is low oil prices because the market automatically corrects itself. I do have this concern that because we're in a transition, and at the same time, we have this very two-directional policy response that lends itself to a more volatile set of supply and demand imbalances than we would have in a more predictable transition and in a more predictable economic situation. 

I guess we should then talk a little bit about net zero and what this means for banks. One of the big trends of the early part of the 2020s was a big political consensus around the need to address climate change. A lot of scenarios were looking at what it would mean to get to net zero by 2050, and in the financial sector and the banking sector that we're talking about today, a lot of banks – including those in Asia Pacific – signed up to ambitious commitments across sectors to reduce emissions intensity or reduce emissions of their financing. 

Six years on – I’m interested in your view, and then I'll give you mine – how smart does that [approach] look? Do you think that approach still holds, that this was a sound investment thesis that we should stick with? Or do you think there's a need to adjust course? 

Abhi

It is really tempting to use the information we have today to judge our behavior six years ago. I'm going to try and avoid falling into that trap. I think six years ago it was necessary. It was necessary for different sectors and actors to take a position, to push forward in ambiguity, because otherwise we would have this dance between regulators, governments, private capital, and banks, and everybody was like, you go first, you go first, you go first. Knowing what we knew then, I think it was necessary. 

Fast forward six years, yes, we do now have more information, so is there a need to look at those playbooks again? I’m going to talk about this from an industrial standpoint. I'd love to hear your reflections on this as someone who works with banks. 

I do think there is a need to look at that book, or that approach rather, particularly in the context of Asia. What we are learning is that economic pressures, short-term or medium-term, on regulators and governments mean that some of those assumed commitments and risk hedges, if I can call it that, through policy have not quite played out at the [intended] pace. And this is not just in Asia – just to be clear, I think other jurisdictions have also kind of slowed it down, taken a slight left turn at T2, whatever you want to call it. So, we now know more. I think the broader capital deployment ecosystem needs to review that information and decide the right way forward. 

From an industrial standpoint, I will say this: the appetite to invest is not dulled, right? There is economic opportunity similarly hedged by regulators who do need to step in, or governments do need to step in, because, save this crisis, SAF and mineral diesel were not competitively priced for airlines. You did need some kind of support, but there was still a lot of capital, as they say, at the gates waiting to be deployed. I think it may have shrunk; that pool may have shrunk in the short term, but it is still there. There are a bunch of entities that I know that are still constantly asking the question, in fact, going back to your question of, does this actually signal an increased appetite for renewables and energy transition? So, having said what I have, I'd love to hear what you think of, again, in that moment versus today.  

Tim

Yeah, and I personally spent a lot of my time over those years helping banks to think through exactly this question and to set those targets. What's marked is that through these crises and through the marked change in policy narrative, if not necessarily actually in policy, banks have largely stuck to their commitments and a lot of them are largely still in line with the majority of their commitments as well. They're not abandoning their net-zero commitments, and most of that is because they don't feel any need to do so. My sense is that there were some things that we've learned, where we were probably lacking nuance when this was first done that we can refine, but that doesn't mean that we need to abandon the commitment to net zero altogether. 

I agree with you on the fact that the commitments made by the financial sector as a whole set a certain degree of investment certainty for real economy companies that were thinking, “Is it going to be worth me making this 20-year investment in battery storage?” Well, if the top 130 banks in the world think so, I probably have more confidence that I'm going to be able to finance this and stay the course. 

Where I think there is probably a need to rethink is some of the hard-to-abate sectors; those early scenarios were a little over optimistic about how quickly we could make progress. You highlighted things like SAF, green hydrogen, green cement, et cetera. Those are just proving to be more difficult or slower than we might have hoped to turn. Also in the oil and gas sector, there was an ambition that we could simultaneously change the demand for energy through renewable energy, and that would lead to a straight-line reduction in oil and gas demand, and we are not seeing that. It does not make sense, particularly in this world of geopolitical uncertainty, to be turning off the oil and gas supply before you've changed the demand for it on the other side. I feel like there's a need for a tweak, but not to throw the baby out with the bath water. Rarely and unusually, you and I actually agree on this, so that's encouraging. 

Let's talk a bit about Iran. What I'm interested in is your view specifically in the region that we’re in – in Asia and we're talking in Singapore here – how has the Iran conflict played out in the economy, and how has it played out on the energy players that are in our market that may be having a different experience to some of the big international oil and gas companies that gained a lot from the increased oil prices? 

Abhi

Yeah, so what has happened on the ground, given we are in an energy-importing part of the world, where most of the oil and gas companies are what we’d call downstream. It's been quite a shock to those economic and financial systems. Some of it, because the individual governments play a big role in these systems in these economies, has reverberated through those government constructs, whether it's foreign currency reserves or FX rates or whatever have you. There has been a significant shock. You talked about some of the demand side controls that the government has tried to put in place, and that's the contrast between some of the big international names who are generally of the producing variety, or at least their balance sheet is over-indexed to the upstream, not to say they don't have downstream. Depending on where their assets are, it's been a relatively productive time for them to be in business. 

I think the other thing that's happening that I talked about is [the industry being] stressed but resilient. There's a whole new set of debates happening on how to continue to build resilience. One manifestation of it is the energy transition, or just different forms of energy, but the other is whether we need to build new logistics infrastructure? I suspect that in closed rooms somewhere are discussions of national reserves, right? These are the prudent conversations that different people will be having. 

So to me, those are two or three different ways it's being manifested, as to what it looks like in six months’ time, I guess again, kind of a health warning of where we are, June 19, 5:45 p.m. At some point earlier today, ships were going through the Strait and I don't think they are anymore. I don't know. My money is squarely in my pocket right now. 

Tim

Yeah, very interesting. Also, how much damage do you think is already done? The supply has been shrunk, and the prices have been higher for a sustained period of time. Even in our best-case scenario, where the Strait of Hormuz opens quickly and stays open, it takes time for that supply to come back on board. How quickly can we get back to normal, and how much damage do you think has already been done by this?  

Abhi

How quickly we can get back to normal is a difficult question to answer because it depends on the free flow of molecules and access to that. What I worry more about though, candidly, is that forex rates and interest rates are harder things to unwind because no single body is in control of those, right? The market tells you that. Invariably, the market will find other reasons, just as an example, why the IDR (Indonesian Rupiah) is where it is today or why it has trended that way. So, that's a really hard bit to go back to February 24th , 25th , 26th, whatever it is. That's one. 

The second is, I do worry that we may not have seen the entire manifestation of the crisis quite yet, because governments have had to write checks to protect people and societies and businesses over the past few months. Those checks will come due at some point. I don't know if they’d manifest themselves in different business confidence levels. There have been all kinds of interventions that make me worry, make me hesitant. 

Tim

I guess this is not the first time that governments have had to step in in the last few years either. This link from geopolitics or global pandemics into an enormous need for government responses, into weakening of government balance sheets, is definitely a watch point. And again, that’s not an Asia Pacific-only commentary; that’s a global concern at the moment. 

Abhi

But for you, given that governments tend to play a disproportionate role, either directly or indirectly, in the ownership of financial institutions in this part of the world, how should these banking systems be thinking about responding to either a recovery, or dare I say, a worsening of what's happening in their markets? 

Tim

I think for me, the reason I wanted to highlight this for the banking sector is that we really see three major impacts here. One is risk management. Over the last several years, we’ve found that we need to have very specific, detailed bottom-up management of credit around an event that is hitting our clients in a very asymmetric way, often related to energy prices. That muscle of understanding on how an event affects my clients, how I serve them to get through this crisis, but also what the credit implications are for me as a bank, has been something we’ve all had to build. My sense is that that’s a muscle we’re going to need to use regularly over the next few years. This is not a one-off and is now done. 

The second is the broader macroeconomic implications. Energy shocks have often been a big part of the inflation shock, which has then fed into interest rates. Higher interest rates, also volatile interest rates, mean we’re in a different rate paradigm in the 2020s than we were in the lower-for-longer environment of the 2010s. In many ways, [this is] better because higher interest rates are better for the banking sector than lower interest rates, but keeping track with our commercial businesses and pricing of a more volatile interest rate environment is a challenge. I think [building] treasury functions that are much more nimble is a big part of it. 

The third one is, what are my investment theses and where am I putting my money? Where am I deploying my capital? Energy is a big consumer of bank capital. I need to have a view on whether I am building a team that is looking at renewable energy and a capability to deploy money to renewable energy, or am I building a capability to deploy to oil and gas? Do I want to go back and support companies to do coal because that becomes a hedge against geopolitical risk around gas supplies? I think those questions are really big for corporate banks around the region. To your point, that’s not disconnected from the policy debate when you’re in a region where a lot of the banks are indirectly or directly state-owned and therefore supporting the national policy agenda. 

Abhi

Interesting parallels, right? Same with the energy system. We advise clients that you’ve got to build up a muscle of risk management, both long term because you’re deploying such big pots of capital in an environment where you don’t know what 15 years from now looks like, but also in the short term with commodity prices going up and down – how do you hedge or not, and how do you make those thoughtful decisions? 

Tim

I think these themes of managing through wider and more frequent volatile cycles, building your business for resilience, and also seeing through the noise to the long-term investment thesis, those are going to be critical in both of our industries over the next few years.

Okay. I'm going to bring this to a close with a few quick-fire questions. We’re going to be hostage to fortune. We’re going to make some predictions that are going to be totally wrong, but it’ll be fun anyway. So first one, end of the year, what’s the oil price going to be? 

Abhi

42. 

Tim

Okay, that was easy, 42. Second one. The next six months. How many of those is the Strait of Hormuz going to be open for? 

Abhi

42. [laughs] I think you’ve known me long enough to know I am not going to—I just would not know how to guess.  

Tim

Abhi’s commitment to the Hitchhiker's Guide to the Galaxy remains undimmed. Abhi, thank you very much for joining us. Hopefully, everybody found that interesting.  I do think this connection between banking and energy is one to watch. Thank you very much.  

Abhi

Thank you.

This transcript has been edited for clarity.

Abhi Bhuchar leads Oliver Wyman's Energy and Natural Resources practice and the firm's Southeast Asia business. Based in Singapore, he has over 20 years of industry and consulting experience, advising clients on business and asset valuation, as well as commercial and operational effectiveness. He is passionate about creating meaningful impact and seeing how his work improves outcomes for businesses and the people they serve.

With a background in engineering, Abhi brings a structured, practical lens to problem-solving. Having lived and worked across North America, the Middle East, the UK, and Southeast Asia, he connects easily with clients from a wide range of backgrounds and brings a global perspective to every engagement.

Oliver Wyman Partner and Head of Financial Services, Southeast Asia, Tim Colyer, is based in Singapore. He leads the firm’s Financial Services work in Southeast Asia.

Tim joined Oliver Wyman in London in 2004 and has been based in Southeast Asia since 2017, working with banks across the region. He helps financial services clients address complex challenges that require technical expertise and strategic change, with a particular focus on transition finance and the role banks can play in supporting the shift to net zero.