Watching the World: APEC seeks energy relief

Oct. 24, 2005
Energy ministers of Asia-Pacific Economic Cooperation (APEC) member states agreed on Oct.

Energy ministers of Asia-Pacific Economic Cooperation (APEC) member states agreed on Oct. 19 to strengthen mutual efforts to develop new oil fields, invest in new refineries, and seek alternative energy sources.

APEC includes Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, South Korea, the Philippines, Russia, Singapore, Taiwan, Thailand, the US, and Vietnam.

In a joint statement, the 21 members said an increase in energy consumption, a drop in excess production capability, a lack of refining facilities, and global hedge funds were the main reasons for the instability in the global crude market.

Noting that APEC countries already consume 59% of the world’s oil supply, the policy-makers predicted that energy consumption in the region would grow by 2%/year for the foreseeable future.

Massive spending

That stepped-up consumption alone requires increased spending in the development of energy, they said, arguing that $5.3-6.7 trillion in new investment will be needed through 2030 to meet the region’s growing energy needs.

These decisions could not be timelier, and they come as APEC countries begin to experience the effects of short supplies and high prices on their economies-effects that span the region, from oil-poor Japan to oil-rich Indonesia.

High prices

In Japan, according to a weekly report released Oct. 19 by the Oil Information Center, the average retail price of regular gasoline stood at ¥131/l. as of Oct. 17, staying at the highest level since March 1991 for the fifth consecutive week.

The average price of premium gasoline remained at ¥142/l. for the sixth straight week, while that of diesel oil stayed at ¥107/l. for the third week in a row.

The average retail price of kerosene gained ¥1 to ¥1,255 per 18 l., an all-time high since the oil market watcher began compiling data in 1987.

Prices are not much different in Indonesia, the only country that is a member of APEC and the Organization of Petroleum Exporting Countries.

Indeed, according to OPEC Governor for Indonesia Maizar Rahman, Indonesia is still importing 400,000 b/d of fuel oil because of the limited capacity of its refineries. To meet domestic demand for fuel oil, he said, Indonesia’s refining capacity needed to be increased by 50,000 b/d.

“Over the next 5 years, Indonesia’s need for fuel oil imports will reach some 650,000 b/d. But if we now build an oil refinery with a capacity of two times 300,000 b/d in the next 5 years, we will no longer need to import fuel oils,” he said.

Meanwhile, leaving no stone unturned, Indonesia reportedly plans to begin imposing a 5% tax on its coal exports, a move aimed at slowing those exports and reducing costs by resorting to cheaper sources of energy.