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Asia Will Drive Future Demand for Fossil Fuels

Countries such as China and India have a large and growing hunger for oil and gas
Ulsan, South Korea Oil Refinery



flickr/ST33VO

Asia's growing appetite for oil and gas is shifting the global energy balance and raising complicated new questions about the United States' role in the Middle East, a new study finds.

The report by the National Bureau of Asian Research deals only glancingly with the explosive emissions linked to Asia's rising oil demand. But clean energy experts yesterday said the issue is very much in the forefront of internal energy discussions.

Meanwhile, Robert Hormats, undersecretary of State for economic growth, energy and the environment, vowed that Asia's rising consumption -- the continent is expected to account for 85 percent of the entire global increase in demand over the next 20 years -- and the United States' rapidly declining oil dependence will not shift U.S. commitment to stability in the Person Gulf.

"The bottom line is that Asia will drive most of the world's import demands and energy needs for the foreseeable future," Hormats said. But he added, "Our decreasing reliance on oil and gas imports does not mean the U.S. has an incentive to disengage from the Middle East or any other part of the world.

"We expect other countries who have an interest in stable energy markets to play a role in this area," he said. "This is particularly true of Asia."

The report, "Oil and Gas for Asia: Geopolitical Implications of Asia's Rising Demand," calls Asia "ground zero" for growth in global energy and commodity markets. The bulk of the demand currently is in China but is dramatically rising across the continent. More than 66 percent of the global oil demand over the past two decades came from Asia.

China is now dependent on imports for half its oil needs, and others in the region are close behind. Its natural gas consumption also is rising, accounting now for about 70 percent of the liquefied natural gas market and growing about 10 percent annually.

Ed Chow, a senior fellow at the Center for Strategic and International Studies, said Asia will want and need to play a larger role in protecting political stability and open sea lanes -- no matter what U.S. leaders say.

Energy's 'center of gravity' shifts away from U.S.
"The center of gravity in the global oil market shifted about five years ago when non-[Organization for Economic Cooperation and Development] demand exceeded OECD demand. Yet political leaders in the West continue to act as if they can dominate the rules of the game when it comes to oil and gas, and are somehow offended when others with a larger stake in the game want to try their hand at it," Chow said.

China, he noted, is often described as a "free-rider," consuming oil imports but doing little to help protect sea lanes. Yet when it moves in that direction, he said, it is accused of pivoting to the Middle East. The message from the United States, Chow said, is "don't create your own capacity for guarding what is vital to your own national interest."

The report notes that the United States is expected to be "roughly self-sufficient" in natural gas through 2035, but oil imports will continue to supply 36 percent of consumption of liquid fuels through 2035. That scenario, though, "does not include the probably reduction in demand due to the stronger carbon-emissions policies that emerged in the United States and other countries in 2011," the report notes. Yet it says nothing about the climate challenges that rising imports will mean for Asia.

Seethapathy Chander, director general of regional and sustainable development at the Asian Development Bank, pointed to shale development on the continent as a potential emissions game-changer.

"Just as it shifted the entire demand supply in North America, it has the potential to do the same in Asia as well," he said. Chander also argued that with an eye to both energy security and diversification, Asian nations are far ahead of many others in both energy efficiency and the development of renewable pathways.

"The attitude here is, you find and you burn. In Asia, even if you find, you don't burn," he said. Despite the Fukishima disaster in Japan, investment in nuclear energy is up in Asia, and last year more than half of global investment in renewables came from the continent. In the medium term, he said, fossil fuel consumption in Asia will continue to rise. But governments are still preparing for an ultimate shift away from fossil fuels.

"This is at the highest level of Asian decisionmaking consciousness," Chander said. While the U.N. climate negotiations have disappointed many and left a string of broken emissions promises in their wake, he noted that clean energy investments in Asia continue.

"The reason for this is they are playing for the future," he said.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

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