The Indian Subcontinent

--What did I tell you starting about three or four months ago. Diesel shortages are going to break the back of human industrial civilization. Without nuclear, Japan is guzzling the stuff and so is most of the rest of the world where small-unit diesel generation is replacing either failed grids or ones that never existed. And with BHP Billiton declaring force majeur on Australian coal, demand is only going higher... to the point where it far exceeds refining capacity. -- MCR

Fast and furious: India’s diesel guzzling to cause shortage soon

First Post,

5 April, 2012

Good lord, we’re guzzling so much diesel that we might soon face a shortage in the stuff.

According to a report in The Economic Times, India could soon become a diesel-deficit nation if the government’s pricing policy on diesel continues to fuel consumption. Currently, diesel prices are controlled by the government, while petrol prices can be freely priced by state-owned oil marketing companies (at least in theory).

That has kept diesel prices stagnant for more than 18 months at around Rs 45 per litre, while petrol prices have soared to Rs 70 per litre (that’s constant chatter that prices will be hiked again soon).

Not surprisingly, that has led everyone from industries to automobile users to choose diesel as the fuel of choice.

“Diesel demand in the country is growing at an annual rate of 8 percent, Naresh Nayyar, chief executive officer of Essar Energy, told the newspaper. “At this rate, India will need a brand new nine million tonnes capacity refinery every day, so in case demand continues to grow this rapidly, India will become diesel deficit by 2016.”

Another report, also by The Economic Times, quoted a government official as saying that diesel consumption accounted for 68 percent of the growth in petroleum products in the first 10 months of the financial year ended March 2012.

This growth is diesel demand is occurring even as oil marketing companies lose Rs 14.36 on every litre they sell because of the government’s policy of subsidising the fuel to users.

Industries are now using diesel instead of fuel oil in their operations, the report said. Even in the automobile industry, diesel-engine car sales now account for close to 50 percent of overall car sales, again because of the cheaper price of the fuel.

However, there is some controversy over how much diesel is actually being consumed by cars. A recent report by the Society of Indian Automobile Man ufactureres and the 12th Planning Working group on Petroleum Sector said that cars consumed only 5 percent of the total diesel consumed in the country. However, that claim has been challenged by the Centre for Science and Environment, according to this report in indiatransportportal.com.

At any rate, the surge in diesel demand should act as a warning sign for the government on the fallout of subsidising diesel prices. Petrol prices are already soaring, and soon, we might be faced with soaring diesel prices because of a shortage of supply.

Clearly, the government cannot continue to subsidise diesel for too long because it is just making things worse. If there was no subsidy, prices would, no doubt, soar but they would be more aligned with demand.

Unrealistic pricing is only fuelling extra demand for diesel – and vividly highlights the problems of the country’s petroleum pricing policy.

There will be consequences.

Pakistan and India to go to War over Water?

Oil Price,

4 April, 2012

A peaceful and stable Pakistan is integral to western efforts to pacify Afghanistan, but Islamabad’s obsessions with its giant eastern neighbor may render such issues moot.

Since partition in 1947, Pakistan and India have fought four armed conflicts, in 1947, 1965, 1971 (which led to the establishment of Bangladesh, formerly East Pakistan) and the 1999 Kargil clash.

With the exception of the 1971 conflict, which involved rising tensions in East Pakistan, the others have all involved issues arising from control of Kashmir.

But now a rising new element of discord threatens to precipitate a new armed clash between southern Asia’s two nuclear powers – water.

Lahore’s “The Nation’ newspaper on Sunday published an editorial entitled, “War with India inevitable: Nizami,” the newspaper’s Editor-in-Chief and Nazaria-i-Pakistan Trust Chairman, Majid Nizami, asked his fellow citizens to prepare for a war with India over water issues. Nizami told those attending the “Pakistan-India relations; Our rulers- new wishes” session at Aiwan-e-Karkunan Tehrik-e-Pakistan, which he chaired, “Indian hostilities and conspiracies against the country will never end until she is taught a lesson.”

While The Nation is a conservative daily, part of the Nawa-i-Waqt publishing group, with a circulation of roughly 20,000, it has a website, and what’s more, close ties to Pakistan’s highest military circles, so Nizami’s comments should hardly be rejected out of hand.

Furthermore, Niazmi’s audience included some high ranking Pakistani officials, including Nazaria-i-Pakistan Vice Chairman Dr Rafique Ahmed; Pakistan Movement Workers-Trust Chairman, retired Colonel Jamshed Ahmed Tareen; former Foreign Secretary Shamshad Ahmed Khan; Jamiat Ulema-e-Pakistan Secretary General Qari Zawar Bahadur; retired Air Marshall Khurished Anwar Mirza; retired Brigadier Hamid Saeed Akhtar and Jamaat-e-Islami Lahore Chief Ameer-ul-Azeem, among others.

At issue are Pakistan’s concerns over India’s ongoing construction of two hydroelectric dams on the upper reaches of the Indus River. Islamabad is concerned that the 45 megawatt, 190-foot tall Nimoo-Bazgo concrete dam 44 megawatt Chutak hydroelectric power project will reduce the Indus River’s flow towards Pakistan, as they are capable of storing up to 4.23 billion cubic feet of water, violating the terms of the bilateral 1960 Indus Water Treaty. The Indus, which begins in Indian-controlled Kashmir, is crucial to both India and Pakistan, but is currently experiencing water flows down 30 percent from its normal levels. The Indus is Pakistan's primary freshwater source, on which 90 percent of its agriculture depends. According to a number of Pakistani agriculture and water experts, the nation is heading towards a massive water shortage in the next couple of years due to insufficient water management practices and storage capacity, which will be exacerbated by the twin Indian hydroelectric projects, as they will further diminish the Indus’ flow.

So, if push comes to shove, who’s got Pakistan’s back?

China.

During the Boao Forum for Asia, on China’s southern Hainan island on 1 April, Pakistan and China agreed to support each other “in all circumstances” and vowed to uphold their sovereignty and territorial integrity at all costs. Pakistani Prime Minister Syed Yousuf Raza Gilani told Chinese Executive Vice Premier Li Keqiang, “China’s friend is our friend, and China’s enemy is ours,” adding Pakistan considers China’s security as its own security and supports China’s position on Taiwan, Tibet and Xinqiang. Li replied that China would support Pakistan’s sovereignty and territorial integrity in every situation, telling Gilani, “No matter what changes take place at international level, we will uphold Pakistan’s sovereignty and territorial integrity.”

It might be noted here that in October 1962, coinciding with the Cuban missile crisis, India and China fought a brief but bitter war along their disputed Himalayan border.

Fifty years later, China and India have yet to resolve their border issues over Kashmir and China continues to claim most of India's Arunachal Pradesh to the base of the Himalayas in the absence of any definitive treaty delineating the border. Kashmir remains the site of the world's largest and most militarized territorial dispute with portions under the de facto administration of China (Aksai Chin), India (Jammu and Kashmir), and Pakistan (Azad Kashmir and Northern Areas).

No guesses therefore as to whom Beijing might back should Pakistani-Indian tensions continue to rise.

Accordingly, to keep the peace, one might paraphrase Ronald Reagan in Berlin – “Prime Minister Singh, tear down those dams!”

But don’t bet on it.

By. John C.K. Daly of Oilprice.com