COMMENTARY
Commentary: China's Growing Thirst for Oil
November 15, 2007
Christopher Bjorke, AFP

In addition to the credit crunch, the housing downturn and the skittish stock market, the other current economic headache is the imminent arrival of $100-a-barrel oil, driven in part by the growing demand from the developing world, particularly India and China.

The United States is still the world champion of oil consumption. Authors Lee Schipper and Wei-Shiuen Ng have estimated China's 2006 oil consumption for passenger vehicles at 450,000 barrels per day, compared to 7 million for the U.S.

That may not seem severe yet, but considering that China's economy is growing at a pace of 11% and millions of its citizens are becoming car-owning city dwellers, China's demands on the world oil supply are set to increase exponentially.

Fuel for the future

If or when China attains similar levels of development and per capita income as the developed world, it will require gargantuan amounts of energy, by virtue of its position as the world's most populous country.

Some statistics from Schipper and Ng to consider:

• In 2005, there were 139 Chinese cities with more than 750,000 residents, compared to only nine in the United States.
• China's urban population is growing by a rate of 10% annually, putting the number of city dwellers at 540 million.
• China is reaching a level of car ownership comparable with the United State, but at a lower level of GDP per capita. With car ownership becoming affordable for more and more Chinese, it could soon be as commonplace as owning household appliances.

China's leadership realizes that their goal of a peaceful rise requires a reliable supply of affordable energy and they have directed much of the country's foreign exchange reserves toward locking up energy deals around the world, often to the frustration of the agenda U.S. and EU have in places like the Sudan and Iran.

China has felt some pressure from rising oil prices, but in the form of shortages rather than higher prices at the pump. Because Beijing subsidizes petroleum prices, refineries are paying more and more for imported crude, but are not allowed to charge more for their more expensive output, the Wall Street Journal recently reported. Many have opted to simply refine less gasoline.

Beijing has responded by raising prices, though kept them at subsidized rates. Chinese consumers are beginning to feel the price pinch that is familiar to consumers worldwide.

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