The escalating U.S.-Israel-Iran conflict has strongly impacted international oil markets as tensions mount in the Strait of Hormuz and Iran announces the waterway’s closure. Brent crude oil prices surged to $80 per barrel this Wednesday. With energy prices rising across the board, academics warn that Taiwan’s Consumer Price Index (CPI) for March could exceed the 2% inflation alert threshold.

Chair Professor of Management at National Central University Liang Chi-yuan (梁啟源) said in an interview on Wednesday that while Taiwan’s officially reported annual growth rate for January was 0.69%, this figure was dampened by a high base effect from the Lunar New Year period. As of February, the rate could already exceed 2%, and the likelihood of it continuing to go up in March is high, he said.

Per Liang’s analysis, the crisis has not only pushed up oil prices but is also disrupting natural gas supply. Natural gas-fired generation accounts for nearly half of Taiwan’s power generation structure, and the island’s strategic gas reserves are enough for only about 11 days. 

Regarding prices, Liang noted that according to Japan and South Korea’s Platts EVA natural gas price index, gas prices have risen by more than 20% since the beginning of February; international oil prices have seen a comparable increase. He said this will be directly reflected in tariff adjustments, and through businesses passing higher energy costs to consumers via more expensive goods and services.

The Economic Ministry has proposed fully activating coal-fired generation in a worst-case scenario. Liang believes coal can partially replace gas and alleviate pressure from electricity price increases, though coal prices may rise as well. In addition, the increased use of coal would undermine Taiwan’s carbon reduction commitments. In view of all these factors, he said he believes the government should carefully reconsider its policy of phasing out nuclear energy.