ANALYSIS - Poor Energy Efficiency means Higher Asia Fuel Bills
Date: 11-Nov-05
Country: SINGAPORE
Author: Neil Chatterjee
Countries across the region have been curbing energy use with emergency measures after being hit with $70 oil, but efficiency in most emerging nations remains poor compared to world leader Japan and will weigh on their economic growth, analysts say.
"The challenge for these countries is to cut the fat but not the muscle," said John Vautrain, vice-president of energy consultancy Purvin & Gertz in Singapore.
In the short-term this means public campaigns to avoid wasting energy and gradually lifting subsidised fuel prices towards international levels, especially in fast-growing China and India, Asia's No. 1 and 3 oil consumers.
Longer-term, nations must develop mass transportation systems and upgrade ageing plants and power transmission systems to help them throttle back on costly imported energy.
Those are tall orders for countries barely back on track after the 1997/1998 Asian crisis, but the doubling in oil prices over the last two years has spurred renewed political vigour.
Energy-intensive Thailand has done all the right things: ended retail subsidies, increased biofuel use, switched electricity generation from oil to more efficient gas, and planned a huge expansion of Bangkok's commuter train system.
Despite its best efforts the need for more energy to drive forward economic growth is intense -- Thailand's oil consumption as a percentage of GDP is set to rise to 11.1 percent in 2006 from 7.8 percent last year, Morgan Stanley estimates.
"It would be erroneous to expect leapfrog improvements in energy efficiency -- this takes a long time and a lot of investment," said Yoghun Jung of the Asia Pacific Energy Research Centre in Tokyo.
Other Asian countries' efforts range from power rationing to more casual business attire, but many measures are voluntary and some still subsidise fuel -- something they can now ill afford as analysts forecast prices higher on average in 2006.
Japan, the world's third largest oil consumer, made great strides to become the most efficient energy user after being hit by soaring import bills during 1970s oil crises, incentivising manufacturers to increase R&D and diversifying its supplies.
Japan uses nearly a third less energy to generate GDP than the average Group of Seven nation, while China uses over four times more, according to the Asian Development Bank.
Calls for better energy efficiency have come recently from the G7 and the IMF, with the International Energy Agency saying this week that importing nations need to change energy habits or runaway demand will mean much higher prices in the long-term.
TARGET INDUSTRIAL USE
Analysts say a key sector to target is power generation.
"Indonesia has not embraced gas and consequently has a long way to go," said Vautrain. "It's not a question of getting more efficient oil plants -- they've got to get off oil entirely, as they've got the gas."
India is planning various projects to pipe and ship gas into the country to meet burgeoning demand, but has not implemented measures to curb this demand. The Philippines could use domestic gas, while China hopes to rely on its huge coal reserves.
"It will be a huge burden for all industries, which have to compete in global markets on cost. Blackouts or brownouts are also very damaging for industry," said Jung. "When energy use rises this could be a big obstacle to economic development."
China suffered severe power shortages last year that boosted demand for fuel oil and diesel for power generation. It is targeting energy use in power, steel and coal mining, and said this week it would promote small cars to save energy.
Countries also need to reconfigure other industrial plants such as cement or glass makers to use less energy, set efficiency targets for buildings and products such as cars, refrigerators and air conditioners, improving labelling and public awareness.
Analysts said energy to make products such as car co
