Based on an analysis of a rural household survey data in Hubei province in 2004, we explore patterns of residential fuel use within the conceptual framework of fuel switching using statistical approaches.

Cross sectional data show that the transition from biomass to modern commercial sources is still at an early stage, incomes may have to rise substantially in order for absolute biomass use to fall, and residential fuel use varies tremendously across geographic regions due to disparities in availability of different energy sources. Regression analysis using logistic and tobit models suggest that income, fuel prices, demographic characteristics, and topography have significant effects on fuel switching. Moreover, while switching is occurring, the commercial energy source which appears to be the principal substitute for biomass in rural households is coal. Given that burning coal in the household is a major contributor to general air pollution in China and to negative health outcomes due to indoor air pollution, further transition to modern and clean fuels such as biogas, LPG, natural gas and electricity is important. Further income growth induced by New Countryside Construction and improvement of modern and clean energy accessibility will play a critical role in the switching process.

The price of a barrel of oil has more than doubled in the past year and a half, from $60 in early 2007 to a high of $142 earlier this summer. This has led to a search for someone to blame for this price increase and for government policies to reduce oil prices.

The actions of energy traders, more pejoratively known as speculators, are being targeted by Ralph Nader, the chief executives of the major domestic airlines and many members of Congress as a major cause of this price increase. However, data from world oil market demonstrates that it is unlikely that speculators have had a noticeable impact on world oil prices.

House Speaker Nancy Pelosi, D-San Francisco, recently called on President Bush "to
draw down a small portion" of the U.S. Strategic Petroleum Reserve to reduce oil prices. But this is unlikely to have a discernible effect on world oil prices.

Oil is a relatively homogenous commodity traded in a world market with a demand of 85
million barrels a day, of which 25 percent is consumed by the United States. The demand for oil is insensitive to changes in the price of oil, particularly in oil-producing countries, where its use may be subsidized. Recent research suggests a 10 percent increase in the price of oil would reduce world demand by no more than 1 percent.

Speculators are accused of increasing the price of oil by taking large financial positions in oil futures markets. But these bets on the future price of oil have no impact on the current price of oil if the current demand equals the current supply, meaning there is no net change in inventories of oil.

According to the U.S. Energy Information Administration, commercial inventories of oil
currently held by the major industrialized countries are below their five-year average. That means consumers are willing to purchase all available supply and run down inventories at the current high price. Given that market outcome, the behavior of speculators cannot be inflating the price.

What would speculators have to do to increase the world price of oil by $25 relative to a
$100 baseline? They would need to buy and put into inventory approximately 2.5 percent of world demand, or approximately 2.125 million barrels a day. Over the course of a year, this would amount to storing 775 million barrels, which is the current amount in the our country's Strategic Petroleum Reserve.

Applying this same logic to Speaker Pelosi's recommendation to draw down a small
portion of the reserve--say 100 million barrels over the course of a three-month period--this 1-million-barrel-a-day increase in supply implies at best a three-month-long $12.50 reduction in the price of oil relative to its current price of $125.

However, according to the Energy Information Administration, world inventories of oil
held by industry and government are on the order of 7 billion to 8 billion barrels. So a more likely outcome of withdrawing 1 million barrels a day from the government's reserves for three months is that privately held inventories would increase one-for-one, and world oil prices would be unaffected.

Although energy traders are a convenient scapegoat for the current high price of oil, the
numbers just don't add up for their actions to have any significant impact on market prices. A strong world demand, not the actions of speculators, is responsible.
But releasing a small amount of oil from the U.S. reserve may still make sense. Given
historically high prices--and the great need for government revenues--this may be a fortuitous time to sell oil and take advantage of the market.
--------------------------------------------------------------------------------
FRANK A. WOLAK is a professor of economics at Stanford University specializing in the
energy sector. He is chairman of the California Independent System Operator's Market
Surveillance Committee, an independent monitor for the electricity supply industry. He wrote
this article for the Mercury News.

PESD Affiliate Mark Howells, along with Joe Aldy and Leo Schrattenholzer, have edited a special issue of the journal Energy Policy on the role of energy in Africa's social and economic development. The issue includes papers that examine an African interaction with the rest of the planet's liquid fuels market, the effect of various drivers on energy and technology transitions within Africa, as well as new quantitative models for projecting aspects of those energy transitions.

Small scale power generation technologies (distributed generation) have the potential to significantly contribute to solving the rural electricity access problem in the developing world. This paper presents results from case studies in Brazil (part of a larger three country study) and shows that differences in business models and the influence of institutions are important factors for understanding success and failure in rural electrification and the contribution rural electrification can play in rural development. 

 

Much existing literature champions renewables implementation on India’s Sagar Island as an unqualified rural electrification success story.  Photovoltaic (PV) and wind systems put in place by the West Bengal Renewable Energy Development Agency (WBREDA) have clearly brought benefits to many of the island’s residents.

 

The highly-touted community management system governing the projects has been successful at instilling local pride and overcoming the traditionally thorny problem of tariff non-collection.  At the same time, an on-the-ground look at the Sagar Island experience identifies some deeper liabilities of the business model guiding the renewables projects.  Two of the ostensible strengths of the Sagar Island implementation – the harmonious tariff collection associated with community management and the resources, competence, and assertiveness of WBREDA itself – can at the same time be considered weaknesses limiting the scope, sustainability, and replicability of the projects. 

This working paper considers these questions through a case study of a typical Sagar Island facility, the Mritunjoynagar PV power plant.  It finds that Mritunjoynagar’s inability to recoup its full operating and maintenance costs by providing appropriate incentives for profit maximization limits the expansion of the project and threatens its long-term sustainability, or at least the relevance of its business model in the absence of a highly-visible champion like WBREDA to ensure continued support.  For WBREDA and other agencies to sustain and replicate similar projects—and their attendant benefits—throughout India, they must adjust their economic model, as WBREDA is beginning to implicitly acknowledge in exploring a franchise model for future efforts.

Four years after the ouster of the extremist Taliban government , Afghanistan is moving ahead but needs investment and expertise to recover from 30 years of war, the country’s ambassador to the United States said during a Nov. 14 luncheon at the Freeman Spogli Institute for International Studies.

“Afghanistan has come a long way but the journey has just started,” said Said Tayeb Jawad, a former exile who returned to work for his homeland in 2002. The one-time San Francisco-based legal consultant was named Afghanistan’s ambassador to Washington two years ago by then-Interim President Hamid Karzai. “We would like to join the family of nations once again and stand on our own feet as soon as possible,” he said.

In an address to about 100 faculty, students, staff, and donors, Jawad spoke of his country’s strategic role in the war on terrorism. “Global security is one concept,” he said. “In order to fight terrorism effectively, better investment in Afghanistan is needed to stabilize the country and make [it] a safer place for Afghans and, therefore, global security.”

Afghanistan has established all the institutions needed for the emergence of a civil society, Jawad said. A new constitution was approved in January 2004, presidential elections took place in October of that year, and elections for a new parliament were held two months ago. “The constitution we have adopted is the most liberal in the region,” he said. Although problems abound—Afghanistan is the poorest country in Asia, only 6 percent of its residents have access to electricity and only 22 percent have clean water—the ambassador expressed hope for the future. About 3.6 million refugees have returned home, he said, and 86 percent of Afghans think they are better off today than four years ago, according to an Asia Foundation survey.

Émigrés are the leading investors in the country, Jawad said, noting that an Afghan American recently pumped $150 million into the country’s nascent cell phone system. Many others, including Jawad himself, have heeded President Karzai’s call for émigré professionals to aid their homeland. Other international expertise is also moving in: Eleven foreign banks have opened for business and 60,000 skilled workers from Pakistan and Iran have moved to Kabul. “We are trying to reconnect the country by building roads and the communication system,” Jawad said. “Reconnecting the country is important for national unity but also for the fight against terrorism and narcotics.”

Tackling the profitable opium trade is a top challenge facing the government and its greatest obstacle to national reconstruction, Jawad said. “Its proceeds feed into terrorism and lawlessness,” he said. In the past, horticulture comprised 70 percent of Afghanistan’s exports. But 30 years of war decimated a generation of farmers and destroyed traditional farming. “If you have a vineyard or orchard, you have to have a prospect of 10 years,” the ambassador said. “If you don’t have a sense of hope, you grow poppy seeds. It takes three months to harvest poppy. You can put it in a bag, take it with you and become a refugee again.”

While terrorists and the Taliban are defeated in Afghanistan, Jawad said, they are not eliminated and they continue to attack what he described as soft targets: schools and mosques and aid workers. But in the last two days, a U.S. soldier and NATO peacekeepers were killed in attacks, which police blame on al-Qaida. To help counter this, efforts are under way to build a trained national army and police force. More than 36,000 soldiers already have been trained. While the country is grateful for foreign military assistance, the ambassador said, “It’s our job to defend our country.”

The country’s leadership also allowed lower-ranking Taliban to join the government; three former officials have been elected to the new parliament. “This was a decision that was difficult to take,” Jawad said. “But we want to deny terrorists a recruiting ground. We are trying to pursue a policy of reconciliation. We cannot afford to have another circle of violence and another circle of revenge.”

At the end of the address, FSI Director Coit D. Blacker reiterated a formal statement initially made in August inviting President Karzai to visit Stanford.