Asians drive slower, shed ties to curb $60 oil hit
SEOUL: Asian nations are scrambling to curb energy use as oil hits $60, but a resilient US economy and subsidised prices at home mean these marginal measures will scarcely dent demand, analysts say.
Tieless Japanese bureacrats, slower Thai drivers and overheated Chinese shoppers may help save a barrel or two of oil or a megawatts of power, but they will not reverse the region’s powerful energy growth, which last year accounted for nearly half of global incremental oil demand.
“Overall, it’s doubtful whether they will have a significant effect in the absence of compulsory measures and a lack of voluntary moves,” said Moon Young-seok, an economist at state-funded Korea Energy Economics Institute (KEEI).
The Asia Pacific region consumes nearly 30 percent of the world’s oil but produces only 10 percent, making it more vulnerable than other areas to rising costs.
While prices add pressure to wobbly economies in Japan and South Korea, they have not derailed US growth, which is vital for Asia’s export-oriented economic health. With that intact, governments are reluctant to incur public wrath with any draconian curbs, although this week’s break above $60 a barrel set alarm bells ringing around the region.
South Korea, whose $50 billion energy bill makes up nearly a quarter of its total imports, this week debated ways to cut back as officials said the searing oil rally threatened to shave nearly 1 percentage point off economic growth.
Seoul sealed a pact with major local makers of electronic home appliances to improve energy efficiency of their products, but said it would reduce electricity use by just 0.25 percent. “If things get worse, we may consider taking some mandatory measures to cut energy use, but not now,” said an official at South Korea’s energy ministry.
Japan, which has a long-term policy to support nuclear power to reduce its reliance on oil, has encouraged public servants to go tie-less this summer to cut air-conditioner use. Efforts to curb electricity help reduce the need for imported oils and liquefied natural gas (LNG) in the north Asian nations, who use both fuels to generate power.
Not so expensive: Energy prices have risen much more slowly than the cost of other goods over the past two decades — blunting public efforts to conserve energy, with consumers and companies showing little inclination to cut back usage. In inflation-adjusted terms, oil at $60 a barrel is still about $20 below the peaks of the 1970s.
“In terms of real economic impact, Asian economies are better able to absorb $50 or $60 oil prices now than they have been in previous years,” said CSFB economist Joseph Lau. Longer-term investment in renewable energy sources such as wind, solar or bio-fuels look more viable with oil above $50 a barrel, but will take years before making a dent.
Thailand, for instance, is mandating a 10 percent ethanol blend in motor fuels from 2007 to reduce oil demand, but in the short term has resorted to pleading with its populace.
“Oil prices will continue to rise and will be even higher when winter comes, therefore we have to seek more saving measures,” Thai Energy Minister Viset Choonpiban, conspicuously jacket-less, told a seminar on Thursday.
Thailand has set a medium-term target to cut back its energy use by 20 percent by 2009, saving it $5 billion, but has seen little benefit from its campaign this summer to get citizens to turn off air conditioners during lunch breaks and asking drivers to go no faster than 90 kilometres an hour.
Subsidies hurt: Bangkok has done more than most of its neighbours by moving to gradually cut fuel price subsidies, hoping that higher prices will accomplish what official campaigns have not.
Others, including major consumers China and India as well as top producers like Malaysia and Indonesia, have allowed only limited increases in subsidised retail fuels, giving consumers little incentive to cut back using cheap energy. For the world’s No. 2 energy consumer China, the push for conservation stems more from a debilitating power deficit than a desire to lower oil use.
It has decreed that 6,000 industrial firms must shut for a week this summer and that shopping malls should run their air-conditioning at 26 degrees. reuters