Energy consumption trends in high growth Asian economies before and after 1986

Abstract

In 1986, world oil prices declined sharply. Lower oil prices have been favourable to economic growth and price stability in Asia. However, oil consumption has also been growing rapidly in developing Asian countries including those dependent on imported oil. The increasing dependence on oil as a source of energy since 1986 is a striking reversal of the previous trend. In their pursuit of rapid industrialization, Asian countries have neglected energy conservation and diversification strategies. Unless energy policy is redirected, countries like Korea, Thailand and the Philippines could be seriously hurt by a sharp rise in oil prices. An increase in oil prices is almost inevitable in the next few years.

Energy Policies in Asian‐Pacific Developing Economies

“…While some see energy conservation as a general trend among oil-consuming countries, others assume that the expenditures of the early 1980s on energy conservation in some countries may not be repeated in the 1990s. This is what happened in some of the fastgrowing Asian countries after 1986 (Chem 1989, James andFesharaki 1990). The oil conservation efforts of these governments seem to have abated, and oil intensities have increased since 1986 when oil prices experienced a sharp decline.…”

“…Kemp (1992) has presented a brief survey of world oil supply and demand, in which he concludes that OPEC will continue to play a key role in the world oil market, and that price uncertainty can be expected to remain high for a number of years. This assessment is shared by others (Fesharaki 1990;Sharma and Tan 1991;Deagle 1983 andCaruso 1989). Deagle puts it this way: Predicting the oil market, even in the short term, is a hazardous business, most forecasts made in the past ten years have been very much in error.…”

“…Using this model, studies by Chern (1989) found a strong correlation between energy use and GDP growth in the Philippines, Taiwan, Singapore, South Korea and Thailand after the oil shocks in 1973 and 1979. James and Fesharaki (1990)' examining the policy responses of five Asian countries (Indonesia, Malaysia, the Philippines, South Korea and Thailand) to the lower oil prices since 1986, found that all of them experienced rapid economic growth from 1986 to 1988 and all exhibited rapid energy consumption growth during the same period. While South Korea, Thailand and the Philippines are oil importers and Indonesia and Malaysia are oil exporters, the vulnerability of all five countries to another oil crisis has increased significantly since 1986.…”

“…However, the subsequent collapse of oil prices in 1986 changed the perceived economics of gas schemes (Davison et al 1988:23). If, as many analysts (Fesharaki 1990(Fesharaki ,1992Davison et al 1988) predict, there will be an era of relatively high oil prices around the turn of the century, this will encourage both gas development and the substitution of gas for oil products. Technological development and industrialization may also make gas transport easier, giving rural areas of the developing economies better access to gas supplies.…”

“…Cambodia has estimated recoverable reserves of 1 to 5 tcf of natural gas and 50-100 million barrels of crude oil, mostly offshore. Once production begins, oil and gas could become Cambodia's largest foreign exchange earner and source of government revenues by 2005-2010(Johnson 1992b). In 1991, offshore exploration blocks were awarded to four oil company joint ventures, and a new round of bidding (primarily for onshore blocks) was launched.…”