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Consumption patterns in Asia will not replicate those in the West
Nov 26th 2016
Better than cow dung
HYDROCARBONS CAN STILL make the heart race—especially if you are short of them. That is evident under a sweltering midday sun on the outskirts of Noida, an Indian boomtown adjacent to New Delhi, where hundreds of poor women, clad in bright saris, recently gathered for a celebration. They were marking what Narendra Modi’s government hopes will be the beginning of the end for an age-old poverty trap: collecting firewood and cow dung for cooking.
The women say they, and often their children too, spend hours every day hunting for firewood. They risk being troubled by snakes and predatory men and miss out on opportunities for more productive work. Studies cited by the government suggest that half a million Indian women die each year as a result of respiratory illnesses caused by inhaling noxious smoke. So the public has responded enthusiastically to a campaign this year to use $1.3bn, part of a windfall from the drop in the price of oil (of which India imports 81% of its needs), to provide it with cleaner-burning subsidised liquefied petroleum gas (LPG).
Dharmendra Pradhan, the petroleum minister, says more than 10m middle-class Indians have responded to a “GiveItUp” campaign and volunteered to transfer their small LPG subsidy to a mother living below the poverty line. Within three years he aims to supply LPG to 50m poor households. He calls it “energy justice”, and it looks like a vote-winner, though delivering LPG reliably across India’s vast hinterland will be hard.
The oil industry will lap up the story. After all, the IEA says that India, which currently consumes less energy per person than Africa, will become the engine of global growth in oil demand by the mid-2020s as its economy grows and its population becomes the biggest in the world.
China, too, will keep rigs drilling across the globe. Over the past decade it has accounted for 60% of the world’s growth in oil consumption, helping to push up prices until they collapsed in 2014. Though Chinese growth will slow and the oil intensity of both China’s and India’s economy will decline, the IEA, in forecasts that assume the 2ºC global-warming target will not be met, reckons that by 2040 China will consume 4.1m b/d more than it does now, and India 6m b/d.
Other emerging markets are also expected to consume more oil as economic growth boosts demand for mobility and petrochemicals. There is plenty of scope to reduce energy poverty. Bernstein, the research firm, says that rich countries, on average, consume 10-25 barrels per person per year, compared with 1-3 barrels per person in poorer countries. It predicts that the global vehicle fleet will double from 1bn to 2bn over the next 25 years, mostly thanks to rising income per person in developing countries, which is expected roughly to offset the drop in demand for petrol in the West. Demand for diesel to power trucks in emerging markets will continue to rise. So will the use of kerosene for aircraft: in both China and India the number of journeys by air is soaring.
Yet the industry’s prospects in developing countries may not be as uniformly rosy as they appear. India’s early development was built on the railways. Its car fleet, at less than 20 vehicles per 1,000 inhabitants, is paltry—about the same as America’s at the time of the first world war. When asked if India’s energy consumption will follow the same pattern as in rich countries, Mr Pradhan bridles: “Why should we do things the same way as other countries? Why should we think the car is the only form of transportation? We want to develop our own model.”
In both India and China, air pollution and congestion in the biggest cities are already appalling, which will limit the scope for a richer population to buy ever more cars. Moreover, China’s climate-change commitments, laid out in pledges in advance of the Paris summit last year, indicate a desire to lead efforts to reduce global warming. India has at least signalled that it will take part, though hesitantly.
King Coal’s long arm
India still relies on coal for 58% of its primary energy needs. It hopes to reduce its dependence on oil (28% of the mix) by 10% by 2022, and plans to double the share of natural gas from 7% to 15%. It intends to rely increasingly on liquefied natural gas (LNG) instead of oil. Within six years it aims to more than double its capacity to turn LNG back into piped gas, and has plans to lay 15,000km of new gas pipelines. Civil servants in the petroleum ministry (one of a handful of fuel ministries) talk of turning India into a gas-based economy. But that sounds futuristic, given that cheap coal underpins power generation in India, and its use is expected to keep on growing.
The government hopes to deploy gas as an alternative to oil-based products in transport as well as for power generation, though this plan may suffer a knock if gas prices rise, which they eventually will. The change of direction is already visible on the streets of New Delhi. All public transport, taxis, rickshaws and many private cars have been converted to compressed natural gas (CNG), which is cheaper and cleaner than diesel or petrol. The drawback is long queues at petrol stations, because a tank of CNG takes a long time to fill and there are not enough pumps.
The government is also developing LNG as an alternative to diesel in long-distance trucking, working with Tata, the country’s largest conglomerate, says Mr Pradhan. In the meantime it plans to use bamboo and other natural products to produce biofuels such as ethanol to blend with petrol. In recent years it has scrapped subsidies for petrol and diesel, and by 2020 it hopes to tighten up the fuel-efficiency standards for the country’s vehicle fleet. All this will be hard to pull off, but suggests that India’s demand for oil may be more constrained than the industry hopes.
On your electric bikes
It is a similar story in China. Though car sales rose by a whopping 24m in 2015, density, at about 120 vehicles per 1,000 people, is still up only to America’s in the 1920s. So the demand for oil is bound to rise, but the pattern of consumption will change. Wang Tao, of the Carnegie-Tsinghua Centre for Global Policy in Beijing, says sales of petrol will balloon even though new cars are becoming more efficient, vehicle-emissions standards are getting stricter and some cities are imposing tighter curbs on buying new cars to keep down pollution and congestion. At the same time diesel, used in industry and for road freight, is slumping as the economy moves towards services and light manufacturing.
Like India, China is promoting LNG for long-distance buses and lorries and CNG for light vehicles. Growth in the use of both fuels suffered a sharp slowdown last year as oil prices fell, but is expected to recover. Mr Wang says the biggest problem in developing the gas market in China is that the pipelines are owned by state-owned monopolies, which bars private companies from moving in and offering more competitive prices.
On the streets of big Chinese cities, the most eye-catching development is the surge in electric bikes, which cause far less congestion than cars and hardly any pollution, though their owners’ traffic etiquette is as poor as that of any car driver. (Delhi, not to be outdone, has acquired a new fleet of e-rickshaws). The IEA puts the number of electric bikes in China at 200m, nearly double the number of cars. They cater for workers who cannot afford cars, and overcome a problem that many public-transport users in big cities face: a long walk to and from the station.
Mr Wang says one of their attractions is that, unlike electric cars, the government has not promoted them. They represent an innovative, free-market approach to a blue-collar problem. The downside is that city authorities in Beijing and elsewhere are cracking down on them and even considering bans, because they see them as a nuisance for cars and pedestrians.
This article appeared in the Special report section of the print edition under the headline Different drinking habits
Nov 26th 2016
HYDROCARBONS CAN STILL make the heart race—especially if you are short of them. That is evident under a sweltering midday sun on the outskirts of Noida, an Indian boomtown adjacent to New Delhi, where hundreds of poor women, clad in bright saris, recently gathered for a celebration. They were marking what Narendra Modi’s government hopes will be the beginning of the end for an age-old poverty trap: collecting firewood and cow dung for cooking.
The women say they, and often their children too, spend hours every day hunting for firewood. They risk being troubled by snakes and predatory men and miss out on opportunities for more productive work. Studies cited by the government suggest that half a million Indian women die each year as a result of respiratory illnesses caused by inhaling noxious smoke. So the public has responded enthusiastically to a campaign this year to use $1.3bn, part of a windfall from the drop in the price of oil (of which India imports 81% of its needs), to provide it with cleaner-burning subsidised liquefied petroleum gas (LPG).
Dharmendra Pradhan, the petroleum minister, says more than 10m middle-class Indians have responded to a “GiveItUp” campaign and volunteered to transfer their small LPG subsidy to a mother living below the poverty line. Within three years he aims to supply LPG to 50m poor households. He calls it “energy justice”, and it looks like a vote-winner, though delivering LPG reliably across India’s vast hinterland will be hard.
The oil industry will lap up the story. After all, the IEA says that India, which currently consumes less energy per person than Africa, will become the engine of global growth in oil demand by the mid-2020s as its economy grows and its population becomes the biggest in the world.
China, too, will keep rigs drilling across the globe. Over the past decade it has accounted for 60% of the world’s growth in oil consumption, helping to push up prices until they collapsed in 2014. Though Chinese growth will slow and the oil intensity of both China’s and India’s economy will decline, the IEA, in forecasts that assume the 2ºC global-warming target will not be met, reckons that by 2040 China will consume 4.1m b/d more than it does now, and India 6m b/d.
Other emerging markets are also expected to consume more oil as economic growth boosts demand for mobility and petrochemicals. There is plenty of scope to reduce energy poverty. Bernstein, the research firm, says that rich countries, on average, consume 10-25 barrels per person per year, compared with 1-3 barrels per person in poorer countries. It predicts that the global vehicle fleet will double from 1bn to 2bn over the next 25 years, mostly thanks to rising income per person in developing countries, which is expected roughly to offset the drop in demand for petrol in the West. Demand for diesel to power trucks in emerging markets will continue to rise. So will the use of kerosene for aircraft: in both China and India the number of journeys by air is soaring.
Yet the industry’s prospects in developing countries may not be as uniformly rosy as they appear. India’s early development was built on the railways. Its car fleet, at less than 20 vehicles per 1,000 inhabitants, is paltry—about the same as America’s at the time of the first world war. When asked if India’s energy consumption will follow the same pattern as in rich countries, Mr Pradhan bridles: “Why should we do things the same way as other countries? Why should we think the car is the only form of transportation? We want to develop our own model.”
In both India and China, air pollution and congestion in the biggest cities are already appalling, which will limit the scope for a richer population to buy ever more cars. Moreover, China’s climate-change commitments, laid out in pledges in advance of the Paris summit last year, indicate a desire to lead efforts to reduce global warming. India has at least signalled that it will take part, though hesitantly.
King Coal’s long arm
India still relies on coal for 58% of its primary energy needs. It hopes to reduce its dependence on oil (28% of the mix) by 10% by 2022, and plans to double the share of natural gas from 7% to 15%. It intends to rely increasingly on liquefied natural gas (LNG) instead of oil. Within six years it aims to more than double its capacity to turn LNG back into piped gas, and has plans to lay 15,000km of new gas pipelines. Civil servants in the petroleum ministry (one of a handful of fuel ministries) talk of turning India into a gas-based economy. But that sounds futuristic, given that cheap coal underpins power generation in India, and its use is expected to keep on growing.
The government hopes to deploy gas as an alternative to oil-based products in transport as well as for power generation, though this plan may suffer a knock if gas prices rise, which they eventually will. The change of direction is already visible on the streets of New Delhi. All public transport, taxis, rickshaws and many private cars have been converted to compressed natural gas (CNG), which is cheaper and cleaner than diesel or petrol. The drawback is long queues at petrol stations, because a tank of CNG takes a long time to fill and there are not enough pumps.
The government is also developing LNG as an alternative to diesel in long-distance trucking, working with Tata, the country’s largest conglomerate, says Mr Pradhan. In the meantime it plans to use bamboo and other natural products to produce biofuels such as ethanol to blend with petrol. In recent years it has scrapped subsidies for petrol and diesel, and by 2020 it hopes to tighten up the fuel-efficiency standards for the country’s vehicle fleet. All this will be hard to pull off, but suggests that India’s demand for oil may be more constrained than the industry hopes.
On your electric bikes
It is a similar story in China. Though car sales rose by a whopping 24m in 2015, density, at about 120 vehicles per 1,000 people, is still up only to America’s in the 1920s. So the demand for oil is bound to rise, but the pattern of consumption will change. Wang Tao, of the Carnegie-Tsinghua Centre for Global Policy in Beijing, says sales of petrol will balloon even though new cars are becoming more efficient, vehicle-emissions standards are getting stricter and some cities are imposing tighter curbs on buying new cars to keep down pollution and congestion. At the same time diesel, used in industry and for road freight, is slumping as the economy moves towards services and light manufacturing.
Like India, China is promoting LNG for long-distance buses and lorries and CNG for light vehicles. Growth in the use of both fuels suffered a sharp slowdown last year as oil prices fell, but is expected to recover. Mr Wang says the biggest problem in developing the gas market in China is that the pipelines are owned by state-owned monopolies, which bars private companies from moving in and offering more competitive prices.
On the streets of big Chinese cities, the most eye-catching development is the surge in electric bikes, which cause far less congestion than cars and hardly any pollution, though their owners’ traffic etiquette is as poor as that of any car driver. (Delhi, not to be outdone, has acquired a new fleet of e-rickshaws). The IEA puts the number of electric bikes in China at 200m, nearly double the number of cars. They cater for workers who cannot afford cars, and overcome a problem that many public-transport users in big cities face: a long walk to and from the station.
Mr Wang says one of their attractions is that, unlike electric cars, the government has not promoted them. They represent an innovative, free-market approach to a blue-collar problem. The downside is that city authorities in Beijing and elsewhere are cracking down on them and even considering bans, because they see them as a nuisance for cars and pedestrians.
This article appeared in the Special report section of the print edition under the headline Different drinking habits
