23-03-05
China's red-hot economy is driving up oil prices. Or at least that's one key
reason why many analysts expect energy costs to go up even further before they
start coming back down. One solution to ensure growth and oil supply simultaneously could be by
boosting its energy efficiency, said Kang Wu, a senior fellow at the East-West
Centre of Hawaii. Certainly, China's unsteady and unreliable energy supply has proved to be of
major concern for businesses operating in the country over the past few years.
For instance, the World Bank warned in its World Development Report last
September that China's shaky electricity supply was not only wasting precious
energy resources, especially as the country continues to depend highly on the
less efficient and more environmentally damaging coal as a fuel source, but it
was also a drain on the bottom line of manufacturers as well. Nevertheless, such hopes may be far too optimistic, given the seemingly
never-ending prospect for growth in China. The country is already the world's
seventh-largest economy, and earlier, the Paris-based International Energy
Agency upwardly revised its estimate for global petroleum demand primarily from
growing oil needs from China as well as the United States. Already, China has surpassed Japan as the second-largest consumer of
petroleum products after the United States by guzzling down 5.56 mm bpd in 2004.
Over the past four years, the surge in the Chinese economy has accounted for
nearly 40 % of the increase in new global oil demand. Moreover, the US EIA's administrator Guy Caruso said that China was not alone
in pushing up energy costs, especially as growth in developing countries,
especially in Asia, will only continue to increase global demand for oil to
unprecedented levels. The country has already taken steps to secure oil supply directly by making
deals with oil-producing countries both big and small. Last year, China promised
Gabon that it would offer interest-free loans in exchange for Chinese access to
Gabonese oil, while it made a similar offer to Algeria where China has invested
in oil refineries. Some have regarded such moves by China as too aggressive, especially when it
comes to dealing with countries that have less than stable governments. But
others are more worried that even with China's deals to expand its energy
sources, there will still not be enough oil to meet the country's
ever-increasing needs.
Source: United Press InternationalWays in which Chinese demand for energy could slow down
But there may be a number of ways Chinese demand for energy could slow down
somewhat, and what's more, a fall in demand for oil could come even if China's
economy continues to expand at its current pace, or so some analysts hope.
"It's not easy to estimate precisely... but it's clear that energy use (in
China) is inefficient," he said, adding that simply improving utilization
of existing energy supplies may actually boost the country's GDP growth rate
still further.
Indeed, the government is already taking considerable steps not only to make
better use of current supplies, but also by pushing consumers to conserve energy
as well.
By shifting away from coal and upgrading its oil-consuming production line,
China may well be able to produce more goods without boosting its energy
consumption, according to some analysts.
The IEA now anticipates oil consumption worldwide to reach 84.3 mm bpd this
year, up 330,000 bpd than it had initially expected.
"China's annual growth in demand for oil is without precedent," said
the head of the Centre for Strategic and International Studies' energy program
chairman Robert Ebel. Furthermore, the US Energy Information Agency expects
China's oil demand to reach 12.9 mm bpd by 2025, so in the long run, it appears
that petroleum prices will only continue getting even higher, even if the
country does succeed in modernizing much of its production facilities and become
more energy efficient.
"It's not fair to blame China alone," Caruso added. Given the
continuous increase in global demand for oil, China is already taking steps to
secure its own energy supply.
"Because its own production of oil is stagnant, the gap between supply and
demand must be covered through imports," CSIS's Ebel said.
So while 60 % of China's oil imports currently come from the Middle East,
President Hu Jintao has been rapidly expanding China's energy supply source by
signing mutually beneficial economic pacts with some unlikely partners including
Nigeria, Kazakhstan, and Peru.
Expectations of new energy sources are "overblown," said US EIA's
Caruso, adding that imports from Africa and Latin America will only represent a
small fraction of the country's huge demand.