Complementos de puesto de trabajo

This thesis investigates the impact of oil consumption, oil prices, and oil price volatility in the deployment process of the six major developing countries of the world, interestingly enough all of these six major developing economies of the world are from Asia. The country selection process is primarily based on the recent history of economic growth, the rate of increase in oil demand in recent years, the projected increase in oil consumption demand based on World Energy Outlook (2007) reference scenario, recent pace of industrialization and trade openness. In this regard,

5 It is to be noted here that, since Dr. Fatih Birol is the chief economist of International Energy Agency (IEA) his projection is based on the World Energy Outlook (2007), a publication of IEA.

it is worth mentioning that, in 2007 these six countries constitute almost 15.97% of the world’s aggregate oil consumption (Appendix Figure 1.2).

The Chinese economy experienced phenomenal growth during the last three decades.

Since the initiation of market reforms in the late 1970s, China’s growth has been about 9.70% per annum (World Bank Country Brief). Being the world’s most populous country with a population of over 1.3 billion, this rapid economic growth has enabled China to lift several hundred million people out of absolute poverty level. However, with strong economic growth, China’s demand for energy is surging rapidly, so is China’s output of pollutant emission (Figure 1.1).

Figure 1.1: Real GDP, Oil Consumption, and Carbon Emission Scenario in China

Real GDP, Oil Consumption and Carbon Emission

Y O CO2

Note: Y, O and CO2 represents real output, oil consumption in million tonnes and carbon emission in hundred million tonnes, respectively. Real output data is collected from World Development Indicators (WDI) by World Bank, while oil consumption and carbon emission data is found from BP (2008).

According to British Petroleum (BP) (2008), in 2007, China was the second largest consumer of energy products in the world behind the United States, more specifically second largest consumer of oil (9.31% of world total, Appendix Table 1.2). In addition to that, consumption of all fuel types in China has increased significantly in recent years to support this increasing trend in economic growth.

Crompton & Wu (2005) shows that in 2003, China consumed 31% of the world’s

total coal, 7.6% of oil, 10.7% of hydroelectricity and 1.2% of world’s total gas.

According to the Appendix Table 1.2, consumption figures for all of the fuels types increased. In 2007, China accounted for 41.27% of world’s coal consumption, 9.31%

of oil consumption, 15.41% of hydroelectricity consumption and 2.30% of gas consumption. However, the growth of output and energy consumption has its consequences; during this period pollutant emission has also increased raising much concern to world’s environmentalists. In addition to coal, oil, gas, and hydroelectricity, the Chinese economy also consumes a significant amount of primary solid and liquid biomass including fuel wood and biogas. Two of the major energy consuming sectors in China are the transportation and industrial sectors.

Moreover, EIA (2009) argues that China is not only the world’s second largest oil consuming country but also the third-largest importer of oil after the US and Japan.

Figure 1.2 shows that due to increased oil consumption China’s import for oil is also increasing after 1993.

Chinese retail prices for petroleum products are regulated according to locations and the types of consumers. The Government maintains domestic price ceilings on finished petroleum products that have not been consistent with the soaring international energy prices. Furthermore, the refineries get government subsidies to ease the gulf between low domestic prices compared to international oil price trends.

Figure 1.2: Oil production, Oil Consumption, and Net Export Scenario of China, 1986-2006*

Rapid economic expansion has also driven up India’s energy and oil demand, boosting the country’s share of global energy and oil consumption. Being the largest democracy in the world with more than 1.1 billion people, India has also experienced an unprecedented economic growth in recent decades. It is to be noted that, from 2006 to 2007, India’s economic growth was about 8.4%. Figure 1.3 demonstrates that this rapid economic growth is associated with significant growth in oil consumption, and carbon emission. Since the Indian government heavily subsidize domestic prices of oil products, such as diesel, LPG (Liquefied Petroleum Gas) and kerosene for its consumers, the demand for petroleum products in India is influenced by the government’s pricing schemes.

Figure 1.3: Real GDP, Oil Consumption, and Carbon Emission Scenario in India

Real GDP, Oil Consumption and Carbon Emissiion

Y O CO2

Note: Y, O and CO2 represents real output, oil consumption in million tonnes and carbon emission in hundred million tonnes, respectively. Real output data is collected from World Development Indicators (WDI) by World Bank, while oil consumption and carbon emission data is found from BP (2008).

With 3.6% and 3.25% of world’s total consumption of aggregate energy and oil in 2007 (Appendix Table 1.1), respectively, India is the fourth largest energy and oil consumer in the world following the United States, China, and Japan. However, since India lacks sufficient domestic energy sources, she must import much of her growing energy and/or oil demand. The combination of rising oil consumption and relatively flat production has left India increasingly dependent on imports to meet its

oil demand. Hence, the country is not only experiencing electricity shortage in major areas but is also dependent on oil imports to satisfy increasing demand from industries and transportation sectors (Figure 1.4, overleaf). However, India also consumes a significant amount of primary solid biomass which includes fuel wood.

Figure 1.4: Oil production, Oil Consumption, and Net Export Scenario of India, 1990-2009*

Indonesia is the fourth largest populous country in the world behind China, India, and the United States. Through transition to democratic process and introduction of rapid decentralization measures, Indonesian economy has experienced strong economic recovery from the Asian financial crisis of 1997. Indonesia joined the Organization of the Petroleum Exporting Countries (OPEC) in 1962. Oil has been the major source of fuel for the Indonesian economy with a consumption of 47.48%

of the total consumption of energy (Appendix Table 1.2). According to Figure 1.5 (overleaf), since 1967, the Indonesian economy is steadily growing along with rapid growth in both oil consumption and pollutant emission output.

Consumption

Production

0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 3,000.00

1990 1992 1994 1996 1998 2000 2002 2004 2006

Year

Net Imports

*2008-09 is forecast Source: US Energy Information Administration

Thousand Barrels Per DAY

Figure 1.5: Real GDP, Oil Consumption, and Carbon Emission Scenario in

Real GDP, Oil Consumption and Carbon Emission

Y O CO2

Note: Y, LO and CO2 represents real output, oil consumption in million tonnes and carbon emission in million tonnes, respectively. Real output data is collected from World Development Indicators (WDI) by World Bank, while oil consumption and carbon emission data is found from BP (2008).

In 2004 Indonesia became a net importer of oil due to the steady decrease in oil production during the preceding decade (Figure 1.6, overleaf). The loss in production is arguably contributed by disappointing exploration efforts and declining production at the country’s large, mature oil fields. Since 1996, Indonesia’s total oil production has dropped by 32%, while the country’s current OPEC output quota for crude oil is set at 1.45 million barrels per day which is well above its production capacity (EIA 2009). Furthermore, since the governance issues in Indonesia remain an impediment to progress, increasing investment which is required for the long term growth of the country – particularly in infrastructure - is an area of concern for the economy. According to the Figure 1.6 (overleaf), the country’s oil consumption in 2006 reached to 1.2 million barrels per day which makes the country a slightly net importer of oil in that year. Historically, Indonesia has always subsidized oil prices for domestic retail fuel consumers, with selling energy products at a discounted price well below the world market parity prices. In addition to fossil fuels (like oil, coal and natural gas) and hydroelectric sources, Indonesia also consumes renewable energy sources like, primary solid biomass including fuel wood and geothermal sources.

Figure 1.6: Oil production, Oil Consumption, and Net Export Scenario of Indonesia, 1986-2006*

Since the 1997 crisis, the Malaysian economy has recovered convincingly. Real GDP grew by 6.3% in 2007 from 5.9% in 2006 due to the increase in domestic demand. Gross investment has also reached at 10.2% in 2007- a three fold increase from 2002. Being consistent with the increasing trend in real GDP, both oil consumption and pollutant emission also show an increasing trend (Figure 1.7).

Figure 1.7: Real GDP, Oil Consumption, and Carbon Emission Scenario in Malaysia

Real GDP, Oil Consumption and Carbon Emission

Y O CO2

Note: Y, O and CO2 represents real output, oil consumption in million tonnes and carbon emission in million tonnes, respectively. Real output data is collected from World Development Indicators (WDI) by World Bank, while oil consumption and carbon emission data is found from BP (2008).

In 2007, Malaysia consumed 0.60% of the world oil. Oil is the second largest fuel source of the country behind natural gas (Appendix Table 1.2). The country is a significant producer of oil and natural gas in the Southeast Asia. Malaysia is the only net oil exporting country among the considered countries in this study. Despite growth in oil production and exploration (P&E) activities, Malaysia’s proven oil reserves and production have declined after 2005 (Figure 1.8). The upstream and downstream oil exploration and production activities in the country are dominated by a nationally owned oil company, namely Petroleum Nasional Berhad (Petronas).

Similar to other considered countries, the Malaysian government also significantly subsidizes domestic oil prices. In addition to crude oil, natural gas, coal and hydroelectric, primary solid biomass is also used in a minimal level.

Figure 1.8: Oil production, Oil Consumption, and Net Export Scenario of Malaysia, 1998-2008*

Despite increasing political instability and market volatility, the Philippines economy has been experiencing steady economic growth in recent years. However, the economy is showing persistent weaknesses in some of the sectors like, a poor tax effort⁶, high unemployment and underemployment rate, and consistent increase in the poverty level. Hence, there is concern whether the growth can be sustained in the light of the above mentioned weaknesses and mounting global uncertainties and political tensions. The growth in recent years in Philippines is associated with growth in oil consumption and carbon emission. Figure 1.9 (overleaf) shows the

6 Low efficiency in collecting taxes by the Government institutions.

increasing trends in output along with the rise in oil consumption and carbon emission trends.

Figure 1.9: Real GDP, Oil Consumption, and Carbon Emission Scenario in Philippines

Real GDP, Oil Consumption and Carbon Emission

Y O CO2

Note: Y, O and CO2 represents real output, oil consumption in million tonnes and carbon emission in million tonnes, respectively. Real output data is collected from World Development Indicators (WDI) by World Bank, while oil consumption and carbon emission data is found from BP (2008).

Oil consumption accounted for more than half (55.91%) of the Philippine’s final energy consumption mix in 2007, followed by coal at 23.87% (Appendix Table 1.2).

Through the 1990s, oil was the dominant energy source in the Philippine’s energy consumption mix. Nevertheless, oil’s share has dropped due to increased consumption in natural gas and coal in the power sector. Thus, oil demand in the Philippines has been declining since 1998. Domestic oil production started in the 1970. However, the production is very minimal with no production of oil from 1996 to 2000 (Figure 1.10, overleaf). The oil industry in the Philippines is mostly deregulated, except for the price setting of petroleum products where oil companies are required to seek government’s consent in setting up oil prices, especially the prices of diesel. There is an informal cap on weekly price increases of 50 centavos per litter. The Philippines economy also consumes primary solid biomass and geothermal energy in their industrial and agricultural sectors.

Figure 1.10: Oil production, Oil Consumption, and Net Export Scenario of Philippines, 1980-2007*

The Thai economy has also shown a persistent economic growth after the financial crisis of 1997. However, the economy has been impacted by political uncertainty over the past years. Despite of this political uncertainty and economic crisis, Thailand has also made substantial progress in social development like, higher income for the people and greater access to health care. With all these increasing socio economic trends, oil consumption and pollutant emission also shows a steady increasing trend over time (Figure 1.11).

Figure 1.11: Real GDP, Oil Consumption, and Carbon Emission Scenario in Thailand

Real GDP, Oil Consumption and Carbon Emission

Y O CO2

Note: Y, O and CO2 represents real output, oil consumption in million tonnes and carbon emission in million tonnes, respectively. Real output data is collected from World Development Indicators (WDI) by World Bank, while oil consumption and carbon emission data is found from BP (2008).

The Thai energy consumption portfolio is dominated by oil. Oil consumption accounts for 50.30% of the total energy consumption by the economy followed by natural gas. Crude oil production and exploration activities have increased in recent years, but the increased effort in P&E have not been able to catch up with the increase in domestic consumption demand by the industrial and transportation sectors. As a result the oil import in the Thai economy is also in an increasing trend (Figure 1.12). Thailand also uses a significant amount of biomass including fuel wood.

Figure 1.12: Oil production, Oil Consumption, and Net export Scenario of Thailand, 1980-2007*

From the above discussion some important observations emerge. One, in recent years all the concerned economies have experienced substantial economic developments. Two, these development efforts are considerably linked with increased consumption of energy, particularly oil, and increased pollutant emission.