Re: Austrian company pledges extra $150 million in gas exploration projects in Pakist
And now the oil crisis
By Dr M. Asif
THE helpless and wretched people of Pakistan are not aware of the turmoil that is about to hit them. An ordinary Pakistani probably cannot remember when he was last provided with any economic relief. Economic shocks have become part and parcel of his life. Examples abound of how crises have overtaken his life.
The very basic necessities of life have become scarce and expensive, be it sugar, flour or oil. It indeed speaks of the courage and integrity of the people of Pakistan that they are managing to survive.
The trouble though is far from over. Yet another economic blow is just round the corner in the form of an imminent jump in the prices of petroleum products. Official sources are hinting as much and media reports suggest a rise of 25 per cent in the next few weeks.
Given the basic position of oil in the global economy, it is important to look at the issue of energy from a wider perspective. For the last five years, crude oil prices in international markets have been on a steep rise. As of December 2007, oil prices have increased by more than 30 per cent in the calendar year. According to energy circles, including the International Energy Agency (IEA), global economic expansion is one of the major reasons driving the biggest increase in oil demand for decades. Other reasons are a disproportionate rise in production capacity, threats of falling stocks and geopolitical conflicts.
The higher than expected growth of the emerging economies, particularly China, has created a huge demand for oil. Chinese demand in 2006 soared by 20 per cent. Experts believe this rapid growth will continue for several years although there is a chance that the economy will overheat and oil demand growth may slacken. Demand has also risen in the US because of the strengthening economy and greater need for higher-grade crude that can be processed into petrol for the fuel-hungry sport utility vehicles (SUVs) popular with American drivers.
In Pakistan, with the imminent increment in oil prices, the cost of living is set to rise. The track record suggests that the 25 per cent hike is going to set a benchmark based on which prices of food, transportation and utilities are all going to increase in a somewhat bigger proportion. For the vast majority of people who are already struggling to make ends meet it is going to be no less than a calamity, having profound economic as well as social implications.
There are valid fears that the present socio-economic crisis in the country will worsen and make economic disparities and social injustice more acute.
The alarm has already been raised about the emerging energy crisis which has manifested itself in the form of an unprecedented rise in oil prices and shortage of supply. It is feared that the surging oil prices coupled with anticipated supply shortages could lead to disturbing scenes of mass unrest. For the government, industry and the wider public, just muddling through is not an option any more as this situation could spin out of control and lead to a complete meltdown of society.
Challenges of a global nature notwithstanding, Pakistan can still do a lot to substantially mitigate the adverse impact. In order to lessen the suffering of the masses and to leave some room for economic activities to continue, a meaningful energy policy would have to be adopted, unlike what has been the practice so far. It is necessary to holistically understand the anatomy of the energy challenge which is diverse both in nature and intensity. And the solution to the energy problem facing the country lies in the generation of energy from indigenous resources.
Pakistan today produces nearly 30-33 per cent of its electricity from hydro-power and more than 65 per cent from fossil fuels (oil and gas). Back in the 1960s the respective share of the two sources in the electricity generation mix used to be 70 per cent and 10 per cent. This indicates a categorical shift from hydro-power to fossil fuels. This has happened despite the fact that hydro-power is an indigenous source and fossil fuel to a large extent a foreign one.
In other words the country has become more dependent on imports and has added to the concerns regarding energy independence and security. In the last fiscal year, crude oil and petroleum products accounted for a little over 24 per cent of Pakistan’s entire import bill. The petroleum group’s share is going to be substantially higher this year since crude oil prices have soared to US$90-99 per barrel as against US$50-60 per barrel a year ago.
It doesn’t take specialist knowledge to know that the recent rise in oil prices is destined to increase both transportation and electricity costs. The combination of the two will in turn boost the cost of every aspect of living.
Pakistan in these circumstances must go back to its indigenous resources, hydro-power and coal. Hydro-power, especially, is critical in achieving energy and economic prosperity. It is indigenous, abundant, renewable, environmentally friendly and, most important, economical. The country has so far capitalised only 15 per cent of available resources. Careful estimates suggest that hydro-power in Pakistan is more than 10 times cheaper than electricity produced from fossil fuels. Hydro-power growth is therefore crucial to bailing the country out of the looming energy and economic crisis. Attention must also be paid to electricity generation from coal.
But a major problem is the lead time, the period between initiation and completion, associated with hydro-power facilities. As a matter of fact it is too late now to avoid the socio-economic earthquake that is set to hit the already deprived masses of Pakistan very shortly. If Pakistan were self-sufficient in its electricity needs through indigenous resources, as the more visionary nations have come to be, the impact of a rise in global oil prices would have been far less severe than what is expected now.
The government must orchestrate the expansion of hydro-power and coal-based electricity generation capacity on a war footing. This is the only help that can be provided to the ill-fated people of Pakistan.
The writer is a lecturer in renewable energy at Glasgow Caledonian University, UK.
http://www.dawn.com/2007/12/17/op.htm
