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Fixing the Growing Oil Crisis in Asia

How countries can work together to make oil cheaper and more readily available.
October 28, 2010

Almost all of the world’s growth in energy demand is happening in Asia, propelled by the economic growth in places such as India and China. Since 1990, for example, China’s energy consumption has tripled.

In places such as Shanghai, it looks like this energy growth is the result of conspicuous consumption: towering sky scrapers blaze with light an night; streets are lined, Times-Square style, with massive LED billboards; vast networks of highways are packed with cars idling in traffic jams.

But in much of Asia the energy is providing basic needs: lights, heat, health care, clean water–curtailing the growth in energy consumption, or switching to more expensive renewable sources of energy, will mean denying people these basic services, which is why Asian governments are working so hard to secure energy supplies, buying up oil fields around the world and constructing vast pipelines and elaborate liquefied natural gas (LNG) terminals.

These efforts are exacerbating long-standing tensions in Asia as countries compete for limited resources, says Mikkal Herberg, a senior lecturer in international relations and Pacific studies at the University of California at San Diego. But it doesn’t have to be that way. Oil, to take one of the most important energy sources, is a commodity that can readily be traded and shipped all over the world. It doesn’t matter which oil field which country draws its oil from–just like it doesn’t maker where in a lake people are pulling out their drinking water. With the lake, what matters most is how much water there is in the whole lake. Likewise, the cost and availability of oil depends on the state of worldwide markets. The best way to make sure those markets are as healthy as possible–avoiding spikes in prices and ensuring that enough oil is found and produced–is to make do what members of the International Energy Agency have been doing, Herberg says. They have all stockpiled oil supplies, which they can use together to ride through supply disruptions, decreasing prices spikes and drops. Right now, for a number of reasons, China and India aren’t part of the IEA–he says that needs to change.

The other major thing that would help is opening up the worlds known oil fields to the management of international oil companies, which typically have better technology for managing oil fields, ensuring that oil fields are managed properly, Herberg says. If they aren’t, oil can be stranded underground. This is something that can only be achieved, he says, if countries in Asia, and elsewhere, exert concerted pressure on countries that have nationalized their oil fields and mismanaged them. As long as they work against each other, competing to carve up the world’s oil resources, these oil-producing countries will have the advantage.

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