Resources and Third World Development

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Resources and Third World Development
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Sustainable Development

• Attempt in recent years to understand poverty,
  development and environmental degradation
  interrelationships
• Sustainable development seeks to achieve lasting
  satisfaction of human needs and improvement of
  the quality of life and encompasses
• Help for the very poorest who are left with no
  option but to destroy their environment to
  survive Idea of self-reliant development with
  natural resource constraints
• Cost effective development using different
  economic criteria to the traditional i.e.
  development should not degrade environment

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Importance of Resources in Development

• All forms of production make demands on the
  resource base
• Resources are consumed through human activities
  in fulfilling basic needs
• Predominant view is that resources are given
  value in regard to functions they perform,
  according to levels of development and
  aspirations of a society
• Environmental resources are viewed as stocks,
  often fixed, limited and non-renewable, found in
  nature
• Debate over adequacy of resources to support
  societal demands
• Resources must reflect human appraisal limits no
  imposed by non-human environment but by human
  ingenuity in perceiving value

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Gasoline Prices in America

• In the 1950s gasoline prices were 30 cents a
  gallon and for this you had your oil and tire
  pressure checked
• Today in California, shown here, gasoline prices
  have hit 3 per gallon Britain 5.43, Germany
  5.12, France 4.38, Japan 3.66
• Is 7 a gallon possible?

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Oil as a Non-renewable Resource

• US imports roughly 50 oil that it uses
• One-quarter of total imports come from Persian
  Gulf
• Easing our dependency on Middle Eastern oil
  producers could simplify foreign policy
• Is this possible?
• Where are alternative sources of oil?

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Alternative Sources of Oil

• Russia, second only to Saudi Arabia, produces
  7mil barrels per day
• Caspian republics, Kazakhstan and Azerbaijan,
  produce 2mil barrels per day
• Latin America expected to grow by 3mil barrels
  per day by 2010
• Technological advances make it now cost effective
  to extract oil off West Africa and Gulf Coast of
  US
• Also refine oil in Canada and Venezuela
  previously unusable

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Fading Enthusiasm

• Much of newly extracted oil will simply replace
  declining output from existing fields
• Norwegian, second largest non-OPEC producer,
  fields are rapidly declining
• Production in Mexico has peaked
• Much of Russias potential lies in Siberia where
  countrys primitive pipelines make shipping
  dangerous
• Nigeria-8 of oil imports to US, can produce
  one-third more by 2007 but conflict has
  discouraged this possibility
• Colombia similarly has been plagued by guerilla
  attacks on its pipelines
• This also is true in Indonesia where Exxon
  operations have been held up by independence
  movements

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Biggest Obstacle Price

• Biggest obstacle to freeing ourselves from Middle
  Eastern oil has nothing to do with politics,
  chemistry or engineering
• Economics is the obstacle price is determined by
  global supply and demand
• Any large producer can affect oil supply and thus
  prices
• Thus Persian Gulf states 600 bil proven reserves
  will continue to dictate control
• OPEC remains powerful force in determining price
  of oil

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Political Economy, Price, Demand for Oil

• Just as important as supply of oil is the
  demandgreater and greater demand keeps kicking
  the price upward- lack of conservation practices
• Oil prices in summer 2005 expected to reach 60
  per barrel and perhaps 80 or higher!
• Two important demand points are China and India
  both of whose production is stagnating or
  declining
• Lack of emissions controls applying to these
  states
• Human rights concerns are being abandoned as
  these nations attempt to negotiate deals with
  pariah states such as Myanmar and the Sudan
• Security issues important too

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U.S. Crude Oil Imports 2005
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Declining Production

• Indonesia is the only Asian member of OPEC
• But relies on 1990s investment in oil and gas for
  production output
• Populists call for Indonesia to withdraw from
  OPEC to save 2mil annual dues
• OPEC maintains that all members must be exporters

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Oil Wasting Away in Indonesia

• Indonesias oil industry squandered resource for
  many years
• Few new wells have been drilled and production
  has dropped by one-third
• Unable to use windfall in oil prices to help
  development
• Meager output has forced China and other buyers
  to look elsewhere Sudan
• But claim to be determined to be an exporter
  again (imported oil in last quarter of 2004)
• Again have raised prices and cut subsidies of
  gasoline and diesel to cut waste (kerosene still
  heavily subsidized as it is used for cooking)
• Passed new laws and tax policies to encourage
  multinational companies to invest

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Indonesia
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Promises and the Reality

• While new laws and tax rules have been passed ,
  regulations that would allow enforcement have not
  been issued
• More seriously a 29 increase in retail gas and
  diesel prices still leaves both selling for under
  1 per gallon
• Thus subsidies still account for 1/6 of
  government spending in 2005
• One added problem is that few people have
  education and training to take jobs in
  Pertaminas oil fields and refineries
• Region surrounding West Java oil field is
  desperately poor and is known as a source of
  prostitutes for Jakartas many brothels

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Pertamina and Exxon Mobil

• Pertamina slow to look for new wells and
  multinationals are reticent to invest troubled by
  Bali bombing incident and other unrest
• In early 2000 Exxon Mobil found large field in
  eastern Java drilling deeper wells that would
  enlarge output by 20
• But production has yet to begin as government
  seeks to renegotiate greater share of revenue
• To attract investment most important step is to
  have clear rules for contracts-transparency
• Developing oil fields in Indonesia is expensive
  (wells are 4 miles deep), so companies reluctant
  to sign away too much revenue before production
  begins
• When you combine tough production sharing terms
  with government uncertainty, big companies are
  reluctant -need better terms in harsh
  environments

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Alternative Energies

• Indeed we can reduce our dependency on oil by
  encouraging the development of alternative
  energies
• Nuclear power- extremely costly and long time
  horizons to build plants safety issues
• Wind power- wonderful but harnessing this in
  sufficient scale is not feasible at this point
• Best solution ?
• Rationalization

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World Forest Cover, 2000
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Deforestation, 1990-2000
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Deforestation in Southeast Asia 1973-1985
Country Forest 1973 (x106 ha) Forest 1985 (X106 ha) Percent Loss
Cambodia 5.25 3.98 24
Laos 18.28 16.52 10
Thailand 22.56 16.74 26
Vietnam 19.92 16.15 19
Burma 48.71 44.82 8
TOTAL 114.70 98.21 14
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Deforestation in Thailand, 1973-1985
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Indonesia Natural Forest Cover Change in
Indonesia, 1985 - 1997
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Indonesian Deforestation

• Average annual deforestation rate for 1985-1997
  was about 1.7 million hectares.
• In total, Indonesia appears to have lost more
  than 20 million hectares of forest cover in this
  time period-- about 17 of the forest area
  existing in 1985.
• Hardest hit during this period were Sulawesi,
  Sumatra, and Kalimantan, all lost more than 20
  of their forest cover.
• If these deforestation trends continue (as they
  have since 1997), non-swamp lowland forest will
  disappear in Sumatra by 2005 and in Kalimantan
  soon after 2010.

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Indonesian Deforestation

• Most destruction is in Papua province, where
  forest concessions have been granted to 15
  companies.
• If 1 cubic meter is equivalent to 100, then
  Indonesia suffers a loss of 7.2 million per year
  due to illegal tree-felling
• Foreign illegal logging mafias have joined
  forces with crooked Indonesian cooperatives and
  officials to plunder Papuas rainforests
• Corruption and lawlessness were fuelling the
  epidemic of illegal logging in Indonesia.
• Much of the illegal logging has been linked to
  the Indonesian Defense Forces, which by its own
  admission obtains 70 of its annual budget from
  a range of sources.

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Chinese Efforts to Halt Desertification

• A huge problem in areas of extreme aridity such
  as the Sahara, Kalahari, Gobi, and Taklimakan
  Deserts areas is desertification
• According to government statistics, 42 billion
  trees have been planted since 1982. Last year the
  effort involved 560 million people. In the latest
  phase of the effort, announced two years ago,
  China plans to plant trees in an area of 170,000
  square miles just over the size of California
  over a decade.

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Planting Green Walls in China

• In Xinjiang, this western-most province, which is
  home to some of the world's biggest deserts, two
  million acres of trees have already been planted
• Jujube trees are particularly suited to the harsh
  climate here, able to withstand winter
  temperatures near minus 30 degrees while thriving
  in the scorching summers.

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Planting Chinas Green Walls

• The Chinese Government reports that deserts are
  expanding at a rate of 3,800 square miles a year
  and some largest deserts appear to be merging.
• During a 1950's campaign to make China a leading
  steel producer, part of the country's disastrous
  Great Leap Forward, the countryside was stripped
  of trees for fuel to fire backyard furnaces,
  causing widespread floods.
• No one expects that today's tree planting efforts
  will have anything like these calamitous side
  effects, but if the campaign is not effective,
  the huge cost is, if nothing else, a financial
  disaster.

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The Results of Planting Green Walls

• Has tree planting on this scale done any good and
  what has it cost?
• During sandstorm season in China wind-borne dust
  from the Taklimakan and Gobi deserts plays havoc
  with aviation in northern China for weeks,
  cripples high-tech manufacturing and worsens
  respiratory problems as far downstream as Japan,
  the Korean peninsula and even the western United
  States.
• According the UN Environmental Program, the
  average number of sandstorms in China has grown
  from 5 in the 1960's to 24 in the 1990's.
• To plant trees on such a vast scale,
  "economically and ecologically, it is a big waste
  of money," he said. "There is a serious problem
  of interests involved, and some people don't
  care, because it is state money."