An energy crisis is any great shortfall (or price rise) in the supply of energy resources to an economy. It usually refers to the shortage of oil and additionally to electricity or other natural resources.
The crisis often has effects on the rest of the economy, with many recessions being caused by an energy crisis in some form. In particular, the production costs of electricity rise, which raises manufacturing costs.
For the consumer, the price of gasoline (petrol) and diesel for cars and other vehicles rises, leading to reduced consumer confidence and spending, higher transportation costs and general price rises.
Economy
In a market economy, the price of energy supplies such as oil, gas or electricity is driven by the principle of supply and demand which can cause sudden changes in the price of energy if either supply or demand changes. However in some cases an energy crisis is brought on by a failure of the market to adjust prices in response to shortages. In other cases, the crisis might be influenced by the lack of a free market. Some economists have argued that the 1973 energy crisis was worsened by price controls.
Oil supply is largely controlled by the national oil companies of nations with significant reserves of cheap oil, including the UAE, Saudi Arabia, Venezuela, Norway and Kuwait. Many of these countries have formed a cartel known as OPEC (Organization of Petroleum Exporting Countries). Since OPEC controls a large proportion of oil output, it exerts a strong influence on the global price of oil. When OPEC decides to reduce the output quotas of its member countries, this will tend to drive up the price of oil as the supply diminishes. Similarly, OPEC can boost oil production in order to increase supplies and drive down the price.
There are, however, limits on the actions of OPEC. If OPEC raises the price of oil too high, demand decreases and production of oil from less productive fields or unconventional sources such as tar sands becomes profitable. In addition, the economies of oil exporting nations are dependent on oil, and efforts to restrict the supply of oil would have an adverse effect on the economies of oil producers.
Oil demand
Transportation represents the greatest demand for crude oil, followed by heating and power generation. In addition, the plastics, pharmaceuticals and synthetic fibre industries rely on crude oil to manufacture feedstocks for their production. The demand for heating oil during the northern hemisphere winter produces seasonal fluctuations in demand, typically building in the lead up to winter.
The United States has by far the largest, consuming around 25% of the world's total oil production and 40% of the world's gasoline production, while creating 21.4% of Gross World Product(GWP) (The population of the United States is about 5% of the total world population). Due to depleted domestic reserves and expanding demand each year, aproximately 2/3 of the oil and gasoline consumed by the U.S. is being imported from foreign countries. This dependency leaves the U.S. highly vulnerable to any supply disruption and/or ratcheting up of prices.
THE energy crisis in India, especially in states like Maharashtra, is forcing the country to tap renewable sources like wind, for its growing energy requirements. Maharashtra, one of the most industrialised states in India, is facing an acute energy crisis, with a shortage of over 4,500 MW. Most parts of the state face a crippling 12 to 16-hour power cut daily, and the state energy regulator has warned consumers in Mumbai – mercifully spared the power cuts – to save power or else face daily power shutdowns.
The Indian government is encouraging private entrepreneurs to enter the wind energy sector, and many have set up windmills in places like Satara on the Deccan plateau in Maharashtra.
According to Brussels-based Global Wind Energy Council, India overtook Denmark in 2005 as the fourth largest wind market in the world, with a capacity of 4,430 MW. India was the strongest market for wind energy in Asia in 2005, with over 1,430 MW of new installed capacity, and placing it fourth globally in terms of new capacity additions.
Globally, total installed wind power capacity now stands at almost 60,000 MW, says the council. Nearly 50 countries have laws and regulations to support the development of renewable energies such as wind, which are gaining importance, thanks to the spiralling cost of oil, and the need to limit emissions because of global warming.
Interestingly, public sector oil giants are leading the drive to exploit wind energy in India. Oil and Natural Gas Corporation (ONGC), the country’s largest producer of crude, and Hindustan Petroleum Corporation Ltd (HPCL), a leading refiner, are among those with ambitious plans in the wind energy sector.
ONGC plans to replace its existing installed capacity of 375 MW of diesel and 413 MW of natural gas-based power with wind energy and also replacing half of the 350 MW of power it draws from the grid in six states with wind power. It also plans to establish two wind farms in Gujarat.
HPCL plans a 100 MW wind park project in four phases. Another public sector unit that is keen on wind energy is MMTC, India’s largest international trading firm, with a turnover of $3 billion. MMTC plans a Rs2.5 billion investment in wind farms in three phases, the first of which – of 15 MW – is expected to come up by June.
Private sector energy major Reliance Energy is also putting up an 8.37 MW project in Karnataka, while Suzlon, a Pune-based wind power giant, has commissioned Asia’s largest wind farm – of 201 MW capacity – near Satara.
The federal ministry for non-conventional energy wants the national grid to draw more power from renewable energy sources. At present, just a little over a fifth of the 7,000 MW of non-conventional sources of energy generated in the country is drawn by the power grid.
State power generators are reluctant to buy power from non-conventional producers of power as they feel their energy bills would shoot up. The federal government is extending several concessions to wind and other non-conventional energy producers, but state utilities have shown lukewarm response so far.
INDIA’S largest player in wind energy, Pune-based Suzlon Energy, has been generating waves in recent months. Last week, Suzlon announced it is investing $60 million in setting up a wind turbine generator manufacturing facility in China, the largest Indian investment in the country.
Suzlon has set up a subsidiary, Suzlon Energy (Tianjin) Ltd in China, which aims to build seven plants, a technology centre and a maintenance centre, with a total investment of about $100 million. Last year, Suzlon had bagged a nearly $40 million contract for a wind farm project in China.
The Indian firm has ambitious global expansion plans. According to Tulsi Tanti, chairman and managing director, Suzlon Energy, his company would be setting up a 600 MW wind power facility at Tianjin, close to capital Beijing. China is part of its international strategic plan, and the firm has opened offices in Beijing and Shanghai.
Tanti points out that China has a potential for a whopping 250,000 MW capacity of wind power, which is more than double India’s existing total power generating capacity. China’s present capacity is just 1,260 MW – much less than India’s 4,430 MW – but is expected to cross 5,000 MW by 2010 and 30,000 MW by 2020. His company is also eyeing South Korea, where it is involved in a 15 MW wind energy project.
The US is its second biggest market, and Suzlon is investing about $20 million in a project to manufacture rotor blades in Minnesota. Suzlon, the world’s fifth largest wind turbine manufacturer, also has operations in Australia and Europe, besides in India.
Earlier this month, Tanti shot into prominence when the American magazine Forbes included him in its list of billionaires. Tanti joined 22 other Indian entrepreneurs – including Laxmi Mittal, the UK-based steel baron – ranking number five globally, with assets of $23.5 billion – in the coveted list.
Tanti’s entry into the list followed the Suzlon IPO (initial public offering), which was over-subscribed 28 times. Suzlon has also been expanding aggressively within India. Last month, the company announced plans to set up a large project in West Bengal, with a 50 MW, grid-quality wind farm.
The company will be investing about Rs2.5 billion in West Bengal initially. Suzlon has a presence in all the seven ‘wind-surplus’ states in India, except Kerala. It plans to invest another billion rupees over the next few months, at its facilities in Maharashtra, Gujarat and Pondicherry.
THE boom in the real estate sector in major Indian cities, including Mumbai, Delhi, Bangalore and Chennai, and the billions of dollars that are being invested in the infrastructure sector – especially road-building, and ports and airports – have resulted in soaring demand for cement.
Cement prices have also shot up sharply in recent weeks, partly due to a Supreme Court, and also because of growing consolidation in the industry. The Indian Supreme Court recently ruled against the over-loading of cement trucks, setting a ceiling of 15 tonnes on each trip.
Cement producers say freight costs will shoot up because of this ruling. Cement prices have shot up to almost Rs220 (for a bag of 50kg) in Mumbai, and about Rs210 in Delhi, up from just around Rs130 a year ago.
More importantly, demand has also skyrocketed, and is expected to head northwards over the coming months. The Supreme Court ruling, allowing re-development of textile mill land in Mumbai, and the federal government’s decision to go ahead full swing with the Golden Quadrilateral highway project have boosted the prospects for the industry.
Analysts are upbeat about the prospects for the industry, and cement scrips have shot up to record highs on the bourses. ACC, India Cement, Mangalam, Shree, UltraTech and a few others have touched 52-week highs in recent days. ACC, one of the largest cement firms in India, touched a record high of Rs750.
Most cement scrips, including Gujarat Ambuja, have jumped by 10 per cent to nearly 60 per cent over the past one month. Investors expect cement prices to climb even further in the coming weeks. Cement consumption has gone up by almost 20 per cent, and the trend is expected to continue.
Cement despatches in February have also gone up by over 15 per cent, as demand for the commodity soars in urban areas. Builders associations in many of the cities have, however, voiced concern about the rising price of cement. The Delhi chapter of the association has demanded the setting up of a cement regulatory authority.
Some state governments have also issued a veiled warning to the industry about the price rise. With elections due to be held in states like West Bengal, Kerala, Tamil Nadu and Assam in April and May, governments there are worried that a hike in cement prices could lead to inflationary pressures, reflecting poorly on the government.
2006-11-02 00:18:17
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answer #8
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answered by Anonymous
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