Crossroads Asia | Economy | Central Asia

Mongolia’s Fuel Crisis Is a Demand Problem, Not Just a Supply One

The cause of the crisis can be attributed to both external and internal factors, highlighting Mongolia’s energy insecurity. The cure might be a path toward transportation electrification.

As Mongolians prepare for the back-to-school season while tourists prepare for long road trips, the transportation sector is in limbo. Long lines of cars wait for hours for fuel, sometimes to find no fuel at all. The government was forced to impose restrictions on fuel sales by limiting the maximum amount that can be purchased on select days. 

The cause of the crisis can be attributed to both external geopolitical factors and internal country dynamics, highlighting Mongolia’s ongoing energy insecurity. The cure might be a path toward transportation electrification.

While Mongolia has proven crude oil deposits, the country is solely dependent on imported fuel, with 97 percent of it coming from Russia. The war in Ukraine and the conflict in the Middle East are creating instability in global energy systems, which could impact the supply side. However, despite the popular notion of delays in Russian fuel shipments to Mongolia, sources have not cited any “major” delays from Russia, which makes it harder to pinpoint the cause of the current situation. 

Internally, urbanization and a mining boom in Mongolia have pushed demand higher, by up to 14 percent annually. For instance, Mongolia imported roughly 500,000 tonnes of petrol and diesel fuel in 2005; however, this number jumped five times higher within 20 years, reaching close to 2.7 million tonnes in 2025.   

The strategic vulnerability caused by Mongolia’s fuel dependency is a well-established fact within energy security calculus. The government has been pursuing a diversification plan, including talks with Kazakhstan on fuel imports and, more recently, with South Korea. Last week, Mongolian Minister of Industry and Mineral Resources Damdinnyam Gongor was in South Korea, striking deals on petroleum products. The country is expected to receive the first batch of diesel, petroleum, and aviation fuel from South Korea as soon as this month, according to the Government of Mongolia’s social media page. However, this strategy of diversification does not address the fundamental question of Mongolia’s dependency on fuel imports.

As of August 5, the average reserve for petrol (AI-92 and AI-95) ranged from 11 to 13 days. The diesel reserve was enough for 18 days, and aviation fuel stood at 10 days, further showcasing the country’s unpreparedness for major fuel disruption. While previous governments aimed to secure and maintain three to six months of fuel reserve, a lack of proper infrastructure and implementation caused this target to be repeatedly missed. The current government vowed to expedite the reserve infrastructure, but it will not be operational........

© The Diplomat