GOOD NEWS THAT OIL HITS RECORD PRICE, UN REPORT SAYS

by Thalif Deen

(IPS) UNITED NATIONS -- As oil prices reached a record high of $72 dollars a barrel this week -- compared with the oil producers' targeted range of $22 - 28 dollars back in January 2005 -- the United Nations remains hopeful there will be increasing demand for conservation and alternative sources for energy.

"These high prices are promoting energy conservation and efficiency efforts, and making alternative energy sources, such as renewable energy, more competitive," says a new 24-page report titled "Trends in Sustainable Development" published by the Department of Economic and Social Affairs (DESA).

"However, the possibility of continuing price increases is raising concerns over adverse global economic impacts. Energy price volatility poses problems for sustainable development in both exporting and importing countries," it warns.

The study, which has been released in advance of the 14th session of the UN Commission on Sustainable Development (CSD) scheduled for May 1-12, says that although oil is the world's most highly traded commodity, and is essential to all modern economies, commercially recoverable reserves are found in relatively few countries.

But still reliance on oil imports is growing rapidly in some major economies, including the United States and China.

In China, net oil imports accounted for 30 percent of consumption in 2000. But by 2004, it jumped to 50 percent. In the United States, from 1991 to 2004, net oil imports rose from 40 percent to 59 percent of domestic consumption.

"Increases in oil prices do have an impact on oil consumption, often starting with the world's poorest countries who are least able to afford higher prices," said David O'Connor, chief of the Policy Integration and Analysis Branch at the Division for Sustainable Development in DESA.

"But there are many factors that can affect total energy consumption, including the ability to switch to other energy sources," he told IPS.

The U.S. Energy Department has predicted that the average price of a barrel of crude oil will remain at about $64 this year, but may possibly decline to an estimated $61 in 2007.

Besides the increasing demands from China and the United States, the escalating oil prices are also attributed to several other factors, including the U.S. confrontation with Iran over nuclear development; militant attacks in the oil-rich Niger delta in Nigeria; and oil cut-off threats by Venezuela in its continuing diplomatic stand off with the United States.

Addressing a press conference last week, Jose Antonio Ocampo, UN under-secretary-general for economic and social affairs, told reporters the availability of energy sources differed among countries.

Increasingly, he pointed out, international exchange of energy not only encompassed oil, but also gas and electricity. "There was global interdependence in the energy sector, and countries with energy resources were as interested in export as were countries with energy demands to import," he added.

Of the world's population of over six billion, more than 2.4 billion people still rely on traditional biomass, including wood, agricultural residues, and animal dung for cooking and heating. But this has resulted in severe health impacts due to indoor air pollution, according to the UN study.

South Asia and East Asia have both seen a sharp drop in the biomass share of energy since 1980, as economic growth has enabled people to shift to cleaner and more convenient forms of energy.

Over the past 15 years, the report said, progress has been made in electrification in all developing regions. However, electrification rates in South Asia and sub-Saharan Africa remain a half to a quarter of those in the rest of the world.

The issue of access to electricity is expected to be high on the agenda of the CSD meeting in May.

Meanwhile, fossil fuels will continue to dominate energy supplies for the next few decades, according to the study. But oil remains the single most important fuel, amounting to 35 percent of total primary energy supply, with the largest share of the increase in oil use coming from the transport sector.

"As cities change their vision of future development toward a more people-centered approach, they are building more infrastructure dedicated to pedestrians and bicycles as a means of encouraging a safer and healthier environment," the study notes.

Ocampo said the report stresses the fact that many developed countries had gone a long way in air pollution controls since the large-scale introduction of regulations in the 1970s.

"The development of many new technologies to reduce air pollution by industrial countries in response to new regulations had benefited developing countries, which had avoided the build-up of air pollution problems," he added.

There were, however, major problems in several developing countries, including the dependence on coal for electricity generation.

He said another major issue was pollution generated by cars. The rapid growth of vehicles in developing countries had generated air pollution problems even when they had the latest technologies.

The study singles out Singapore, which has long had a road pricing scheme with tolls for those entering the city center. This has now been fully automated and the tolls are variable with the time and day of week, to reflect congestion.

A similar system has been established in London and the 15-member European Union has launched an European Transport Pricing Initiative involving eight other cities: Bristol and Edinburgh (UK), Copenhagen (Denmark), Rome and Genoa (Italy), Helsinki (Finland), Trondheim (Norway) and Gothenburg (Sweden).