Oil is not well for the poor
Since 2002, oil prices have been climbing steadily, mostly triggered by rapid growth in oil demand in the developing nations, declining excess supply capacity in the world oil market, and geopolitical instability in oil-producing regions.
This poses far-reaching challenges for energy security, in general, and for the poor''''s energy access in particular. Depending on how these challenges are identified, understood, and addressed will determine whether the developing countries of the Asia-Pacific region achieve continued inclusive economic growth, thereby reducing poverty under the MDGs (Millennium Development Goals).
Therefore, TERI undertook a ''''Policy study on impact of rising oil prices on the poor and implications for achievement of the MDGs''''.
This policy study employed a combination of policy reviews, quantitative analyses, and detailed micro-level case studies covering poor communities (both rural and urban) in selected countries (China, India, Indonesia, and Lao PDR). The outcomes of the study are intended to not only provide an understanding of the causes and effects of mega trends at global, regional, and national levels, but also to help appreciate how these trends have eventually impacted upon the livelihoods and lifestyles of poor consumers.
The study shows that, in the long term, higher consumer spending on petroleum products will reduce net incomes, and in the absence of new income inflows, other essential expenditure (such as on health and education) will be affected. Since urban households spend a larger share of their expenditure on energy than rural households, the urban poor will be more affected by higher oil prices. All poor households that use inferior fuels (coal, kerosene or biomass) will face added health problems, particularly among women and children.
The adverse effects of the oil price rise are reflected on the MDGs along two pathways-directly at the level of poor and low-income households through an increase in their expenditure on fuels and oil-based power; and indirectly via macroeconomic coping strategies and policies that reduce the poor''''s incomes and income-earning opportunities, and the capacity of governments to provide them relief.
The study recommends key strategies and policy options for the four countries under different oil price scenarios. The accessibility of modern energy services to the vulnerable can be enhanced through fiscal measures like targeted subsidies, and finally through the development of renewable energy programmes so that their dependence on oil is reduced. Bilateral and multilateral development agencies have a role to play in assisting regional countries to pursue some of the major recommendations made.
This poses far-reaching challenges for energy security, in general, and for the poor''''s energy access in particular. Depending on how these challenges are identified, understood, and addressed will determine whether the developing countries of the Asia-Pacific region achieve continued inclusive economic growth, thereby reducing poverty under the MDGs (Millennium Development Goals).
Therefore, TERI undertook a ''''Policy study on impact of rising oil prices on the poor and implications for achievement of the MDGs''''.
This policy study employed a combination of policy reviews, quantitative analyses, and detailed micro-level case studies covering poor communities (both rural and urban) in selected countries (China, India, Indonesia, and Lao PDR). The outcomes of the study are intended to not only provide an understanding of the causes and effects of mega trends at global, regional, and national levels, but also to help appreciate how these trends have eventually impacted upon the livelihoods and lifestyles of poor consumers.
The study shows that, in the long term, higher consumer spending on petroleum products will reduce net incomes, and in the absence of new income inflows, other essential expenditure (such as on health and education) will be affected. Since urban households spend a larger share of their expenditure on energy than rural households, the urban poor will be more affected by higher oil prices. All poor households that use inferior fuels (coal, kerosene or biomass) will face added health problems, particularly among women and children.
The adverse effects of the oil price rise are reflected on the MDGs along two pathways-directly at the level of poor and low-income households through an increase in their expenditure on fuels and oil-based power; and indirectly via macroeconomic coping strategies and policies that reduce the poor''''s incomes and income-earning opportunities, and the capacity of governments to provide them relief.
The study recommends key strategies and policy options for the four countries under different oil price scenarios. The accessibility of modern energy services to the vulnerable can be enhanced through fiscal measures like targeted subsidies, and finally through the development of renewable energy programmes so that their dependence on oil is reduced. Bilateral and multilateral development agencies have a role to play in assisting regional countries to pursue some of the major recommendations made.