Whatever the new Union minister of Petroleum Mani Shankar Aiyer may have us believe, oil prices are on a roll and will remain cripplingly high. Oil experts say that, unusually, the surge comes during an increase in oil production: there is no shortage. Surging global demand -- from a recovering world economy and China in particular -- is feeding this frenzy, combined with the fear premium given to terrorist attacks on oil establishments. There is also the hard fact that big oil producers benefit from high prices. Saudi Arabia, they estimate, has alone earned about US $42 billion from the windfall of higher prices and higher production in the past some months. Therefore, from all available indications, we should forget oil can be cheap. Prices will "stabilise" in the range of US $38-43 and may even increase to US $50 in coming months.
What does this mean for us? A lesson we learnt early in climate change negotiations is that carbon dioxide emissions are linked to growth. This is why the leader of the world's largest economy and largest polluter -- the US -- rejects the Kyoto Protocol, the agreement to cut emissions in the industrialised world. It will hurt the US economy, "cost us jobs". We know the price of oil and the cost to the economy are deeply entangled and that this challenge of reinventing the energy economy is quite intractable. But it is essential, indeed a matter of survival, for us.
Let us be clear. As oil prices rise, so will the cost of our growth. The developed world witnessed economic boom in the 1950-1960s. But with growth came social and environmental problems, demanding investment into social security, public health, public water and sewage supply and public investments into pollution control. But remember, all this while, the per capita income of the industrialising West was already higher than ours. More importantly, their cost of energy was low: oil costs were US $3 per barrel as compared to US $30 per barrel earlier this year, and US $41 per barrel now. They could afford to temper the adverse impacts of growth through making public investments and subsidies.
But what about us? We are adopting the same model of growth, highly capital-intensive and so socially divisive. It is material and energy intensive and so discharges huge quantities of waste. But the high cost of energy, combined with our poverty and inefficiency, will mean that we will simply not possess the ability to make investments critical to equity and sustainability.
So it is that we cannot afford the current, mindless, development trajectory. We have to rethink the options for our energy and economic security. And put them into policy and practice.
Currently we are making all the mistakes we possibly can. We import two-thirds of our oil. Our demand is increasing, putting our foreign exchange position at risk. Our strategy for energy security is to out-bid China and the rest of the world in securing access to oil and gas. We are agog on laying pipelines from Iran, importing gas from Qatar and persuading Bangladesh to sell us gas.
First we buy this energy at enormous cost. Then we use it most incompetently. We all know that our power sector is inefficient. But what we don't seem to understand is that there is more to this unplanned incompetence. There is also the "planned incompetence", driving our energy security to the ground.
Let me give just a few instances. We are "planning" for more private vehicles, and so more highly subsidised highways to transport more goods and people. Today, the rich who incite burgeoning cars numbers -- the pride of our economy -- pay less road tax than the poor who judder in public buses. Today, the same private vehicles use the so-called fuel of the poor, diesel, with impunity. Still, politicians say they cannot raise the price of diesel. We have ensured that transportation of goods is road-based and by private transporters. We do nothing, except waffle in policy documents, to promote public transport and most importantly rail-based freight and passenger movement. Indeed, we are intent on crippling the railways by deliberate administration.
Then we make sure electricity is unavailable to the vast rural network of farmers, who need it to power their pumpsets and draw groundwater. They, then, must run pumpsets on private diesel merrily adulterated with kerosene, a subsidised fuel. Another "planned incompetence".
Then there is, of course, the even bigger challenge of breaking, at least lessening, dependence on fossil fuels -- oil, gas and coal -- for economic growth. I accept it is easier said than done. But, I would argue, we can and must do better. We have a large population unconnected to the grid. We also know that taking the grid to these scattered settlements across the country is not profitable; the costs are high, the recovery of dues is low.
Therefore, can we not begin to get serious about new sources of energy? Can we use, for instance, our country's vast biomass to generate fuel? Therefore, grow wood and crops as energy sources, which in turn would generate jobs. It would be reinventing the modern day chulha by making gas out of a renewable source of power.
But all this will require seriousness of intent. Indeed, it will require a national energy emergency-like programme. But then security is a state of the mind. The question is, how will the Indian bureaucracy, so glued to its own security, ever comprehend the need for such change?
-- Sunita Narain
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