Oil is the key to the world’s economy. Nations are going to war simply to gain control over oil-fields and oil price fluctuations hold developing nations at ransom. And fearfully, oil reserves are not getting any bigger in the Middle East or Africa. So ASEAN countries have to seek newer import points. This is where India and China come into the picture.

The Jakarta Post points out how, during the mass uprising against the Shah of Iran in 1979, oil prices shot up without any check. The International Energy Agency (IEA) — formed in 1974 as a watchdog for controlling oil prices in the international markets — is nearly at its wits’ ends. There were the Iraqi invasion into Kuwait, the invasion of Iraq by the USA, depleting natural resources, growing Asian oil demands in the aviation and shipping sectors and the high costs of capacity additions.

The recent Hurricane Katrina tested the abilities of the IEA to counter short term oil-crisis. The Gulf of New Mexico, where the Hurricane did the most damage, is an oil-refinery hub.

Asian countries do not have any safety net to speak of in times of oil crisis. Japan and Singapore tried to tap other resources than the IAE for oil procurement. But they have failed. And as matters stand, it is getting increasingly difficult to create oil hubs in either China or India. IAE studies have revealed that in spite of spending millions of dollars on Chinese refineries, only a four days’ worth of net Chinese oil imports are stored in the refineries.

India, to build an oil storage capacity for 12.5 days of Indian national oil consumption, will require $25 billion and that too will not be ready till 2030. The Asian oil scenario seems to be grim. India will have to remain dependent for the major part on foreign exports of oil.

Jakarta Post does not go into the issues of how to come out of these problems. It appears that the only solution is to slowly shift to other energy resources, like nuclear energy and solar energy. At least the power sector and individual power needs can be met from these resources. This will somewhat reduce our dependency on traditional fossil fuels.

And Mukesh Ambani’s Reliance Industries is proactive in creating refineries and oil storage hubs. May be, private enterprises will have more cost efficiencies than Government undertakings. Such entrepreneurial efforts need to be acknowledged and encouraged.

Image: PBS.org

Via: Jakarta Post