Interesting concept, isn’t it? Apparently, China thinks so.
I receive an electronic newsletter from the Oil Depletion Analysis Centre (ODAC). The newsletter’s purpose is to disseminate information about oil depletion issues.
A recent issue featured a story written by Wang Ying and Theresa Tang (published in Bloomberg, on June 20). According to the article, China (which has been broadly accused of being one of the major reasons for the large global demand for oil) is taking measures to contain domestic oil and gas demand.
Ying and Tang’s article discusses a move by the government in China that raised gasoline and diesel prices by at least 17% and increased power tariffs to rein in energy use.
The article says jet fuel was expected to go up 25% and that on July 1, 2008, China planned to raise power prices by an average of 4.7% and cap thermal coal prices until the end of this year. According to the authors, the government will pay 19.8 billion yuan ($2.9 billion) in subsidies to help farmers, fishermen, and public transport operators cope with higher costs.
China’s decision follows similar moves by India, Malaysia, and Indonesia and took place shortly before oil suppliers and consumers met in Jeddah, Saudi Arabia, to discuss the 94% gain in crude oil prices.
The stated goal of China’s efforts is to achieve 5% reduction in energy use for every unit of gross domestic product annually for the next three years.
Extrapolating from the assumption that higher prices will reduce consumption, we should expect to see more energy conservation in the United States.
As with anything, however, there are differing opinions about how successful these sorts of measures will be.
Though it appears higher prices would necessitate energy conservation, there are those who think China’s price hike will have the opposite effect.
Higher oil-product prices may encourage rather than trim demand, according to Goldman Sachs Group Inc. report: “We would argue the price hike could lead to normalization of supply versus the recent rationing of sales at the pump.”
So the long and the short of this is that even a seemingly plausible solution might not have the desired result. Without an astronomical increase in oil-product prices that places those products beyond the reach of consumers, there’s no guarantee that higher prices will curtail consumption.
The only way to create a real change in consumption is to change awareness, attitudes, and our approach to using energy. If we as individuals find ways to use energy more efficiently, we have the potential to reduce our hydrocarbon dependence as a nation.
(If you are interested in learning more about ODAC, visit the organization’s website: www.odac-info.org.)
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