Sunday, May 20, 2007

Junking OPEC oil for alternative energy

Heavy dependence on costly imported oil and gas is fast draining the economic coffers of most developing economies. Yet, most Third World government continue to import fossil fuels to run their various industries. Officials said this is their only way to keep up with the rest of the world. Otherwise, the economic lifeblood of these nations will grind to a halt.

But what is disgusting about the issue is that developing countries continue to ignore the importance of alternative energy resources, which are much cleaner and safe to use. In China, most heavy industries use coal-fired power plants to produce goods both for domestic use and exports. But the negative impacts on China and the rest of its neighboring environments are tremendous.

Right now, air pollution in China is a topic that cannot be ignored. To the Chinese officials, using coal to run their manufacturing plants is much cheaper to use. Instead of exhausting their oil resources, China had to export them in exchange for much-needed foreign exchange receipts. Besides, it has sufficient deposits of coal, which can still go a long way before they are finally exhausted.

While other developing Asian countries have to make do with what available energy resources they have at the moment. In most cases, the indigenous oil stocks are not even enough to supply the whole month's fuel requirements of the domestic markets. As such, they are left without a choice but to resort to importing oil at a price pegged in the open markets and dictated by OPEC. Now, the question remains disturbing to many economic analysts as to why only seal contracts with OPEC-member countries. Why not focus their attention on non-OPEC countries, who have abundant supply and much cheaper oil to acquire?

As the saying goes, "Spend only the money that you have." Why would a developing nation, with huge debts to the World Bank, insist on relying for oil supplies from the Middle East? Don't they have the option to negotiate with non-OPEC countries which sell oil at a less cost? Of course, they do. Perhaps, it's just a matter of political will and a little deviation from the bilateral agreements. In the first place, why sign an agreement that will tie up the needs of a particular country over a long period of time? Surprisingly, only weak countries are always the victims of these kind of unfair transactions, most oftentimes are advantageous to the interests of the exporters.

Economists believed that in oil trade business, there is money. But part of these transactions only go to the pockets of government officials who have a say in the deals. This means that perpetual subservience to the bilateral agreements doesn't help a lot. Instead, these contracts are sometimes misconstrued as an escapegoat for corruption at the expense of the taxpayers' money.

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