Soaring oil prices threatening poor: UNDP report

Soaring oil prices are threatening the prospects of millions of the region's poor and forcing them further into poverty, says a report issued Thursday from Bangkok by the UN Development Programme (UNDP).

As oil prices climb, the impact on the poor may presage worse to come, warns the publication �Overcoming Vulnerability to Rising Prices: Options for Asia and the Pacific.'

�Oil prices have tripled over the past four years. Today the price is approaching US $ 90 a barrel. This has meant that the Asia and Pacific region has had to pay an additional bill almost US $ 400 billion for imports compared to the amount spent in 2003. This is 20 times the annual aid flow to the region," said Hafiz Pasha, UNDP Regional Director for Asia and Pacific, at the launch of the report in Bangkok.

�It has been a real issue for an otherwise fast-growing region to absorb the staggeringly large bill," a UNDP press release quoted Pasha as saying.

An alternative perspective was presented by Piyasvasti Amranand, Minister for Energy of the Royal Thai Government at the launch. �This time around the price of oil has gone up so much that we are seeing renewable technologies developing and materialising. These new technologies will be beneficial to everyone," he said.

Interviews conducted for the report among poor rural and urban households in China, India, Indonesia and Lao PDR reveal that rising oil prices are starting to put a brake on human development and in some cases, shifting it into reverse. Between 2002-2005, the household interviewed suffered dramatic price increases- paying on average 74 per cent more for their energy needs. This included 171 per cent more for cooking fuels; 120 per cent more for transportation, 87 per cent more for electricity, and 55 per cent more for lighting fuels.

This has provoked huge public outcries- and incredible hardships for the poor � who are being literally, pushed into the dark. Millions are being forced to �climb down the energy ladder," reverting to traditional fuels that are unhealthy and inefficient, says the report. The poor are cutting back even on bare essentials of travel and services which are increasingly beyond their reach.

The Oil Price Vulnerability Index (OPVI) developed in the report ranks countries in terms of their economic strength and performance, and the extent to which the growth depends upon imported oil. The OPVI is a composite index, which brings together 18 indicators which tracks the level of dependence of economies to imported oil, and thereby, their vulnerability to fluctuations in global oil prices.

The countries that are ranked most vulnerable are Maldives, Cambodia and Sri Lanka, whose low economic strength, lower economic performance and high oil dependence are immediately evident, the press release has stated.

Countries that seemingly appear less vulnerable are also not immune to the effects of these oil hikes: Malaysia and Thailand, for example, their rapidly growing oil consumption, could become more vulnerable in the future. China and India, on the other hand, at present do not seem to be as immediately impacted, since their reliance is greater on other energy sources like coal, and their stronger performing economies and larger reserves enable them to ride through this period.

From the point of view of countries that are vulnerable to the oil price fluctuations, particularly the LDCs, the report proposes a new mechanism that will enable countries to cope with sudden downturns � the Asia-Pacific Compensatory Oil Finance Facility, AP-COIL will help countries cope with their prolonged liquidity problems.

Source: The Rising Napal