The Hindu : Opinion / Leader Page Articles : Reducing oil dependence in the future

Online edition of India's National Newspaper
Saturday, Apr 23, 2005

Opinion

Opinion - Leader Page Articles

Reducing oil dependence in the future

Sudha Mahalingam

It is time we followed traditional wisdom by fully exploiting indigenous sources of energy — both commercial and non-commercial — to fuel the growth of our economy.

TODAY, THE world is pumping more oil than ever before. At 82 million barrels a day, crude supply just about matches demand. Since last July, crude prices have stubbornly stayed above the $40 a barrel mark, thanks to a combination of factors — galloping demand in China, supply disruptions in Nigeria and Venezuela, slow production recovery in Iraq, speculative deals by traders and a terror premium prompted by attacks on Saudi oil installations.

This year, crude prices have again risen by 25 per cent over last year and are now cruising above $50 to a barrel, buoyed by increased U.S. and European demand for inventory build-up. OPEC — the producers' cartel — is furiously pumping 27.7 million barrels of crude a day, its highest in 25 years. Saudi Arabia, the queen bee in the OPEC cartel, can no longer swing prices by fine-tuning output to demand movements. With spare capacity at historic lows, OPEC does not have the wherewithal to cool the market. Ali Naimi, Saudi Oil Minister, ominously hinted that prices would continue to stay high.

Alarm bells

Alarm bells have started ringing in oil-importing countries, partly because of the spiralling oil prices and partly over fears of a potential supply disruption. The Paris-based International Energy Agency — a buyers' cartel of OECD members — has hastily put together a draft report entitled Saving Oil in a Hurry: Measures for Rapid Demand Restraint in Transport. The 121-page report underlines the vulnerability of the member nations to price shocks and supply disruptions, and goes on to discuss ways of reducing dependence on oil used in the transportation sector, which leads oil consumption all over the world. The measures include, apart from the usual mix of energy-saving options such as flexible work schedules, car pooling, telecommuting, speed restrictions, even tyre pressure calibration etc., steep cuts in mass transport tariffs to encourage greater use of public transport.

What is surprising, however, are the rather drastic emergency measures contemplated by the report, such as driving bans on weekends, alternate day car-use, etc. The report goes so far as to compute the extent of policing that would be required to enforce the ban and justifies the costs involved. The upshot is that fuel importers must be ready with a plan to suddenly curtail consumption without seriously disrupting normal life.

Not to be left behind, a motley coalition of American security experts spanning the entire political spectrum from neo-conservatives to liberals and labour unionists has put together a blueprint to liberate America from excessive reliance on imported fuel from a region it perceives to be increasingly unstable. More importantly, the Americans believe that the large sums they pay for their oil imports go to support terrorist regimes in oil producing countries — so much so that they pay for the cost of the war on terror on both sides. Titled Set America Free, the document is a strident call for an urgent transformation of the U.S. transportation sector which accounts for two-thirds of all the oil the country consumes.

Alternative modes

The blueprint envisages alternative modes and fuels for automotive propulsion to be put in place in the next four years. It recommends replacement of existing oil-guzzling vehicles with plug-in light and ultra-light hybrid vehicles that can run on both electricity and oil. Car users are urged to switch over to alternative fuels such as alcohol, ethanol, methanol and even bio-diesel — fuels whose technologies are already tried and tested and do not require large-scale investments in new R&D. The Institute for the Analysis of Global Security, a Washington-based think-tank that does pioneering work on energy security issues, maintains that a complete switchover to hybrid vehicles and new fuels will reduce U.S. oil consumption by 8 million barrels a day, cutting down oil imports by nearly two-thirds. The estimated cost of this makeover is $12 billion. Supporters of the plan argue that the sum should be raised through a small levy on petroleum products. After all, at 43 cents to a gallon, the North American gasoline consumer gets away lightly on petroleum taxes, compared to his counterparts in Japan or Europe.

Meeting the challenge

Set America Free does not stop there. Acknowledging the challenge posed by excessive oil consumption — the U.S. has just 3 per cent of global oil reserves even as it consumes 25 per cent of global production — the coalition wants billions of tonnes of biomass, crop residues and agricultural waste produced in the country to be utilised to generate electricity that would fuel vehicles in future — a veritable leap back to the future! After all, drilling in the Arctic National Wildlife Reserve — endorsed by President George Bush in his Energy Bill — will help the Americans cut down imports by no more than 3 per cent and that too in the next 20 years!

Tax-shy Americans are being persuaded to fund extraction of costly shale oil and Alberta tar sands through levies on petroleum consumption. These fuels cost thrice as much to mine as conventional oil. The recent explosion at a BP refinery near Houston that claimed lives has further accentuated the American sense of paranoia over the vulnerability of global oil pipelines and infrastructure, forcing them to look inward for solutions. The U.S. Representatives are currently debating the Energy Bill, which also calls for tough fuel economy measures to be implemented by automakers.

Call for a paradigm shift

It is instructive to note that the developed countries' call for a paradigm shift comes at a time when India and China, the two developing nations, are strenuously trying to move from non-commercial sources of energy — like biomass and crop residues — to hydrocarbons, much of which is supplied by imports. Similarly, in our eagerness to ape Western lifestyles, we have opened the floodgates to automobile manufacturers locking us firmly into a spiralling fuel consumption trajectory. Every year, we in India add around 900,000 passenger cars and about 1,50,000 sports utility vehicles and this does not even include trucks and heavy vehicles. Everyday, we are bombarded with images of the latest model sports utility vehicles and sedans, seducing us to buy bigger and better gas-guzzlers.

Apart from the adverse environmental impact of the growth model India has chosen, opting for more and bigger passenger cars aggravates our import dependence. Transportation accounts for two-thirds of India's oil consumption and within this category, it is the passenger car segment that is the biggest and fastest growing. Fuel import bill for the financial year that just ended is estimated to be a staggering $25 billion and it requires little imagination to guess where it might head in the next financial year if the price spiral continues, as experts believe it would. With our domestic oil production well past its peak, dependence on imports is expected to be near total in the next 20 years. Apart from Kyoto-related considerations, the sheer burden of a ballooning import bill is something that we can ignore only at our own peril.

Increase in imports

Power generation is another activity for which India is becoming increasingly import-dependent. During the last decade, most of the new thermal projects that have come up are gas-based. Domestic gas production is unable to cope with the growing demand for gas and we are increasingly turning to gas imports — currently in the form of LNG, to be supplemented by piped gas from the neighbourhood as and when the pipelines materialise. The just-commissioned Hazira LNG project pushes up India's gas imports by 50 per cent to 7.5 tonnes a year. Further expansion of LNG capacity is also on the anvil. LNG prices being firmly locked to crude prices, the present crude spiral spells even steeper import bills for gas. While gas is surely a cleaner alternative to coal-based generation and gas turbines have shorter lead times to construct and commission, the implications for our import-dependence cannot be lost sight of.

It is time we followed traditional wisdom by fully exploiting indigenous sources of energy — both commercial and non-commercial — to fuel the growth of our economy. The Ministry of Power has identified 50,000 megawatts of hydel capacity that it deems feasible. Many of them are run-of-the-river, mini and micro-hydel projects that can be built speedily without involving massive relocation or rehabilitation. Hydel is a clean source of energy without recurring fuel costs and it needs to be fully exploited, before we rush to add more gas-based capacity. We must also fully harness non-conventional sources of energy such as crop residues and biomass, but while doing so, we must employ technologies that will enable us to utilise these indigenous resources in a clean, efficient and sustainable manner. Simultaneously, we must beef up our public transport systems and provide a clean and affordable alternative to the present profligate and unsustainable quest for personalised transportation. Even when we implement all the measures outlined above, our dependence on fuel imports will continue but at least we can slow down the pace of growth.

(The author is with Centre for Policy Research, New Delhi. The views expressed are personal.)

Printer friendly page
Send this article to Friends by E-Mail

Opinion