Friday, November 09, 2007

India, China: Pl. Don't Follow USA on this One

India, China: Pl. Don't Follow USA on this One

I am talking about hunger for oil.. Americans consume quarter of all oil produced (total production - 85 million barrels per day) and If each Indian and Chinese were to consume as much oil as an average American does then the world oil production capacity (and availability) would have to jump by 250% to 200 million barrels a day.

Even if Indians and Chinese doesn't consume as much as Americans do, it is predicted that by 2030 India and China where one third of the humanity lives, would import as much as what US and Japan does today. To meet this demand, world oil production capacity would have to go up to 115 million barrels a day and just imagine what this would to do the price of the crude oil? It is hovering around USD 100 today and your guess is as good as mine as to what it would be in 2030.

What is even more worrisome is the fact that India and China seems to fast going down the path of aping US in its love for cars. Even though road infrastructure is far from perfect, its pot hole filled streets are already overflowing with cars, the appetite for Cars seems to have just started. Tata Motors has promised to bring out a people's car at INR 100,000 (USD 2500) which will only dramatically increase the need for imported oil.

I am happy that the Indian economy is booming and that is enabling more Indians to buy cars. But if this boom is not managed properly, we will have drastic and telling impact on the quality of life of all inhabitants of this earth, not just on Indians.

As two of most populated countries in the world, India and China owe it to the world to properly govern their growth, particularly the hunger for oil. Here are several things they can do:
  • Make Car buying unattractive: This can be done via sin tax and in the cultural context
  • Public transport system: Invest heavily on public transport system. It is unfortunate that cities like Chennai aren't effectively leveraging the train system. MRTS started in 80s is languishing with no direction and funds for years.
  • Alternate Sources of Energy: Just like China and India leap frogged in telecommunications, they should jump ahead of oil hunger and find new and efficient sources of energy. India and China were lagging behind in the telephone connectivity, but they jumped on to the mobile bandwagon and now boast of several hundred million connections. They should do the same in transportation as well, but this time by inventing something new and showing the way to the rest of the world.
This does not absolve US of its responsibility to itself and rest of the world. I remember filling up gas in California at USD 0.69 a gallon in 80s and in the same spot Gas costs around USD 3.00. Even at that price, Gas is cheaper in US than several other parts of the world. Even now, the 'need' for bigger cars and bigger houses has pushed oil consumption in US to 21 million barrels a day from 17 million barrels in 90s. But this is not sustainable for very long. It is incumbent upon US to show the way out of this oil hunger by reducing its own consumption and finding new alternate sources of energy. There are several things US can do to in this front:
  1. Sin Tax: Just like cigarettes, increase the tax on gas and big cars to change citizen behavior.
  2. Tax incentives: Encourage use of smaller cars / alternative sources of energy via tax incentives.
  3. Improve Mass Transport System: Allocate more funds to mass transport systems and encourage people to use them via subsidies.
  4. Alternate source of energy: Put focus (and money) on finding alternate sources of energy in a big way.
The oil as we know is not going to last for ever and it is a responsibility of all of us to reduce energy consumption in any which way it is possible.