Tuesday, July 1, 2008

Can South Asia Survive in a World Without Oil?

The world will eventually run out of oil. When it does, will south Asians be able to cope with life as we know it? To answer this question, let us examine where India and Pakistan stand today in terms of oil consumption relative to the rest of the world.

Pakistan consumes about 400,000 barrels per day.
India's consumption is 2.6 million barrels per day.
China's daily consumption is 7 million barrels.
United States uses 22 million barrels a day.
The wold's daily consumption of oil is 80 million barrels.

While China, India and Pakistan are currently at very low per capita energy consumption, their energy requirements are growing at about 6-8% per year, much faster than the US or Europe. While some nations use energy more efficiently than others, the amount of oil used per capita is a rough measure of the standard of living of a nation. Most of the oil is used as fuel for transportation and electricity but a substantial amount is also used in essential materials such as fiber, fertilizer, plastics, industrial chemicals and asphalt which people rely on for clothing, food, cars, toys, housing and paved streets. When the price of oil goes up, there is a cascading effect on all other prices and causes serious inflationary pressure.

As everyone today feels the effects of high oil prices, it is not hard to imagine what the impact would be if the world were to run out of oil without workable alternatives. In all likelihood, the alternatives would be several different sources of energy and raw materials. For example, water, solar, wind and nuclear may become predominant energy sources and organic biomass and widespread recycling may be the source of materials for other uses. Even with these alternatives, our lifestyles would have to change significantly.

India has just announced its plans to deal with climate change which calls for focus on solar and other renewable energy sources. Prime Minister Manmohan Singh said that over time India must shift from economic activity based on fossil fuels to one based on non-fossil fuels, and from reliance on non-renewable and dwindling sources of energy to renewable ones.

At a scientific conference in Lahore in March last year, President Pervez Musharraf, announced that the government would encourage development of all alternative energy sources — particularly solar and wind energy — to increase electricity generation by 10–12 per cent annually to meet growing energy demands. He also favored the use of nuclear power for producing more electricity to help fill the gap. With the recent change of government, these pronouncements have yet to be followed by a coherent energy policy and plans.

In the absence of oil, there will have to be lifestyle changes in South Asia and elsewhere. The starting point is to think in terms of a smaller radius of activity. Today, our food travels hundreds of miles from the farms to our tables. There will be a need for more local grown foods and greater local production of non-food items to reduce the need for transportation. The globalized economy will have to be replaced by the localized economy. The need for housing, workplaces, local services, production, farming and shopping to be in close proximity would have to guide land-use policies in towns and cities across the world. There will be many more local farmers markets with local, homegrown fruits and vegetables for sale. Telecommuting and shorter work weeks would also become popular.

Recycling will have to become the normal way of doing business as other commodities such as iron and copper also become scarce. Sustainable living will not just be nice but necessary for the human race to survive.

Given the relatively small energy consumption and essentially localized economies in South Asia, both India and Pakistan have the time and the opportunity to develop their energy policies and plans based on the scenario of the world without oil.

For those interested, here is a link to alternate reality games based on world without oil.

1 comment:

Riaz Haq said...

Power sector has been holding Pakistan back in recent years. Here's BMI assessment of energy sector prospects:

The new Pakistan Power Report forecasts Pakistan will account for 1.37% of Asia Pacific regional powergeneration by 2013, with a stable theoretical generation surplus before the country’s substantialtransmission losses are taken into account. BMI’s Asia Pacific power generation assumption for 2008 is7,093 terawatt hours (TWh), representing an increase of 3.2% over the previous year. We are forecastingan increase in regional generation to 9,099TWh by 2013, representing a rise of 28.3%.

Asia Pacific thermal power generation in 2008 totalled an estimated 5,570TWh, accounting for 78.5% ofthe total electricity supplied in the region. Our forecast for 2013 is 6,999TWh, implying 25.7% growththat reduces the market share of thermal generation to 76.9% - thanks largely to environmental concernspromoting renewables, hydro-electricity and nuclear generation. Pakistan’s thermal generation in 2008was an estimated 62.8TWh, or 1.13% of the regional total. By 2013, the country is expected to stillaccount for 1.13% of thermal generation.

For Pakistan, gas is the dominant fuel, accounting for 47.5% of primary energy demand (PED) in 2007,followed by oil at 30.7%, hydro-electric energy at 12.9% and coal with a 7.9% share. Regional energydemand is forecast to reach 4,859mn tonnes of oil equivalent (toe) by 2013, representing 24.9% growthfrom the estimated 2008 level. Pakistan’s estimated 2008 market share of 1.52% is set to ease to 1.45%by 2013. The country’s estimated 2.5TWh of nuclear demand in 2008 is forecast to reach 5.0TWh by2013, with its share of the Asia Pacific nuclear market rising from 0.49% to 0.75% over the period.

Pakistan is ranked third behind India in BMI’s Power Business Environment Rating, thanks to itsrelatively high level of renewables (mostly hydro) generation and healthy power consumption/energydemand growth prospects. Several country risk factors offset some of the industry strength, but thecountry is in a good position to keep clear of Malaysia below.

BMI forecasts Pakistan real GDP growth averaging 3.98% a year between 2009 and 2013, with the 2009estimate at 2.50%. The population is expected to expand from 161mn to 177mn, with per capita GDP andelectricity consumption increasing by 20% and 11% respectively. Power consumption is expected toincrease from an estimated 81TWh in 2008 to 99TWh by the end of the forecast period, which provides arelatively stable theoretical generation surplus (before transmission losses, etc.), assuming 4.3% annualgrowth in electricity generation.

Between 2008 and 2018, we are forecasting an increase in Pakistani electricity generation of 59.2%,which is mid-range for the Asia Pacific region. This equates to 27.2% in the 2013-2018 period, up from25.1% in 2008-2013. PED growth is set to increase from 19.1% in 2008-2013 to 25.8%, representing49.9% for the entire forecast period. An increase of 49% in hydro-power use during 2008-2018 is a keyelement of generation growth. Thermal power generation is forecast to rise by 52% between 2008 and2018, with nuclear usage up 380% from a low base. More details of the long-term BMI power forecastscan be found at the end of this report.