China's oil import not to blame for global price hike

As international oil price continues to climb, so-called "Chinese oil threat theory" is spreading via various kinds of channel. Some overseas media blame the oil price hike on China's demand growth. The claim is groundless because China's oil import has not caused any pinch in world oil market.

Despite the fact that China's oil demand grows each year and that oil trade makes up a relatively large share in China's foreign trade China's oil import growth is slowing down. Crude oil import growth is estimated to fall back by about 30 percentage points while import of finished oil products by 17 percent. Causes of the situation include the constraining effect of high oil price on demand, slowing down of investment in fixed assets, easing up of electricity supply-demand pinch, rapid development of substitute fuels like ethanol and the high base in last year etc.

Moreover, in addition to being a big consumer China is also a big energy producer, who relies on domestic energy supply with its energy self-sufficiency as high as 94 percent. This number is more than 20 percentage points higher that the average figure for countries of Organisation for Economic Co-operation and Development (OECD). China's primary energy production accounted for 11 percent of world total last year with an overall energy equivalent overseas dependence less than 5 percent. For less dependence on imported oil, China's crude oil production will reach 180 million tons this year while exploitable oil reserves are also growing.

Does China import a lot of oil? Judged by China's energy consumption structure, oil only accounted for 22.7 percent of the country's primary energy consumption last year, with per capita oil consumption less than two barrels, ten percent that of the United States, one eighth of Japan and one fifth of the European Union (EU). According to estimation by the International Energy Agency, China's daily oil consumption will grow only by three percent this year. Statistics on oil import in last year show that with 1.3 billion people China imported 168 million tons of oil, the Republic of Korea (ROK), which has a population of 48 million, imported 120 million tons; Japan with a population of 130 million imported 260 million tons while the US imported 640 million tons of oil for its 280 million people. By comparison China did not import much. China's net crude oil import last year made up only 6.3 percent of world trade, about one fourth that of the United States and half that of Japan in the same period.

Does China's import push up international oil price? In the last two years, petroleum, as a primary and non-renewable energy resource product, caught more and more attention with its price changes having great impact on global economy. According to estimation high price would make China pay $10-odd billion more in its oil import this year. Undeniably, current international oil price has seriously deviated from the normal supply-demand relations, tying down world economic growth. Oil price hike is the irrational result of market speculation, particularly financial speculation. Since last year, $800 billion from more than 8,500 funds had been put into speculating oil price in various forms, once resulting in speculation premium of $15-20 per barrel. With its small share in world total oil import China has very limited impact on oil price. China's oil demand grows but does not affect the overall development of global oil market.

Over the four years since joining the World Trade Organization (WTO), China makes prompt adjustments on oil trade policy, realizes diversification of crude oil and finished oil product import and gradually opened domestic market according to promised schedule. China launches energy diplomacy not only to meet domestic demand, promote the sustainable development of its economy, but also for the sake of a stable supply in global energy market and the common prosperity of human society. High oil price and energy security issues cannot be addressed by one country alone. An urgent task for now for various countries is to intensify energy exchange and cooperation, make the unduly oil price fall back rationally and help world economy move forward in an orderly manner, rather than continue to be deluded by the "Chinese oil threat theory".

the article on the front page of People's Daily Overseas Edition is translated by People's Daily Online