India’s thirst for energy will affect everyone

Nation's middle class is growing, and with it the demand for autos

India 2005

By Michael Hirten

June 09, 2009

Gasoline at $2.21 a gallon? This may be the price that we may someday remember fondly.

It takes only a few days in a country like India to sense the threat of a new and hungry competitor for oil and gas. Sales of cars, scooters and motorcycles are booming. The use of electricity and petrochemicals for industries and personal use is soaring.

If nothing else, think air conditioning; India is one hot country, and increasingly people have the money to stay cool.

Energy!

India is competing for natural gas supplies on its east coast, for Iranian oil in the West and for oil from the Russian republics to the north. It's investing in refineries and pipelines.

The same holds true for China, Russia and Brazil. New players, limited supplies, higher prices.

Right now, India and other developing nations consume very little energy compared to the guzzling appetites of the United States.

Although India's population tops one billion people, it uses about one-tenth of the oil and about one-eighth of the energy used by the United States and its 300 million people.

The historical disparity, of course, reflects the relative wealth of the United States and poverty in India. But it's all changing quickly. India's middle class is on the move.

And often its motor vehicles mark the advance.

Take Vikram Deep, manager of operations at Wipro Technologies' AOL call center in New Delhi.

He's the "new" India which looks a lot like our "old" America: A wife, two kids, two cars, a motor scooter and even bigger ambitions.

"My wife and I are aggressively saving to buy a Skoda Superb, a well-known Czech-made car," Deep writes in an e-mail from New Delhi.

At $30,000, he acknowledges the exorbitant cost. India is a poor nation where incomes average around $500 a year. But its middle class (300-million people and growing) has money and dreams.

"It does stretch our budget, but it's a car worth having smile."

Note: I've included the smiley face. This is the sort of thing I get in office e-mails. East or West? Developed or undeveloped? The lines are down.

Deep manages about 200 people for Wipro, a large, global outsourcing consulting company serving the securities, insurance and banking industries, also manufacturing, retail, utilities and, of course, energy.

His aspirations - his acquisitions - reflect India's advance to the economic major leagues. On the farm team, a notch or two below him in Wipro's New Delhi's operation, is Guninder Pratap Singh, 23, a coach for about 15 consultants on the AOL's United Kingdom account.

These days he's driving a 2004 Hyundai. He keeps it outside his air-conditioned apartment.

Energy!

In fact, he says half of those on his team - first rung "consultants" earning about $3,400 a year - have cars or two-wheelers.

"They follow my lead," Singh says. If they are good at their jobs, in 18 months they can be a team leader. Onward and upward.

So why not get that scooter ($1,500) or that entry level new car($6,000 and less for used wheels)? Sure, gas costs $3.25 a gallon but mileage on these vehicles is good.

Which leaves us Americans ... where?

Higher costs for gas and oil? Count on it.

Shortages? Probably.

Alternative energy sources? Needed - as soon as possible.

Conservation? Yeah!

Of course, these are guesses. But there's a lot at stake.

We've built our world on easy energy prices. It isn't going to be easy any more.