From the Business Times today

EDITORIAL


Published May 28, 2004

Asia's energy opportunity

SOARING oil prices are an opportunity for Asia to work out a long-term energy strategy.

It would not be wise to look to the West for inspiration. The United States is not doing much to reduce its dependence on oil. Given its ease of access to oil supplies from existing and developing sources, Washington is unlikely to break with its current oil-centred energy policies. Europe is more proactive in discouraging oil use through high taxes, but it too enjoys proximity to considerable energy sources. It is linked to energy-rich Russia by pipelines and has North Sea resources as well.

By contrast, Asian nations are forced to pay a premium for their oil imports, 70 per cent of which come from the Middle East. The Asia-Pacific region imports about two-thirds of the oil it consumes and demand is forecast to grow by 1.1 million barrels per day to about 23 million barrels this year. For a region that contains more than half of the world's population as well as some of its fastest growing economies, a transition towards lower dependency on fossil fuels should be a top priority.





So, it is heartening to see signs of meaningful cooperation among Asian nations emerging. Five of Asia's leading economies have agreed to work together in the current energy environment. At a forthcoming meeting in New Delhi, Japan, China, India, South Korea and the Philippines will discuss how to create and operate a strategic stockpile as well as press Middle East exporters to discard the premium charges levied on their imports. South Korea, which announced the new cooperation plan at the International Energy Forum in Amsterdam earlier this week, believes the arrangement will have a fighting chance of success since it will be an effort entirely by oil importers, unlike the larger regional forums that host both buyers and sellers.

But even larger forums are striving for shared solutions against the backdrop of rising oil prices. For instance, last week, the 22-member Asia Cooperation Dialogue in Manila decided to take the first steps towards building up oil stockpiles.

At the moment in Asia, only Japan and South Korea have stockpiles of any worthwhile size. Japan has 160 days' supply. China and India are just starting to build up their own. However, it will be expensive to build stockpiles now, and countries contemplating doing so will not only have to pay dearly but may also push up market prices further - although they may have no choice but to press ahead anyway.

But this group of large consumers must think beyondtheir current strategies. Stockpiles and new oil exploration can only be short-term answers. The western growth model they have embraced requires a huge amount of oil at competitive prices to sustain it.

Talent

Without good prospects of cheap oil supplies long into the future, the time has surely come to consider measures that have been dismissed as utopian or unworkable thus far in the West. Renewable energy research has already made small inroads into Asia. India is the leader but still meets only 3 per cent of its energy needs in this way. Obviously, the region needs to emulate the bold approach the Japanese have taken. Tokyo has cut its reliance on imported energy since the 1970s to 40 per cent of its energy needs as Japanese companies use more nuclear power and liquefied natural gas. Its car companies have introduced hybrid-engine cars, such as Toyota's Prius. China is planning a huge expansion of its nuclear power programme. Like Japan, it has also experimented with fuel cell vehicles and has just started testing them.

What is required is a more collaborative, rather than competitive, effort to boost supplies of new, cleaner forms of energy. Will the current steps lead to such cooperation? Certainly, the region has sufficient talent, money and large enough markets to experiment. And the benefits will surely outweigh the efforts