China's huge footprint being felt with the rising cost of oil

Special to World
Friday, October 22, 2004

The ubiquitous bicycles of Mainland China are giving way to automobiles. Car production in the still communist nation was up 81 percent last year, and oil imports were up 40 percent in the first half of this year alone.

Is there any wonder that gas prices seem to be spiralling out of control?

There are ongoing arguments about what is causing the worldwide spike in oil prices: growing consumption, the Iraq War, speculation based on unpredictable disruptions in production from Nigeria to Venezuela and the entry of China as a major player.

The conventional view is that the Chinese market alone is responsible for 40 percent of the global increase in oil demand since 2000. But apologists for Beijing say that while there is acknowledged strong and very rapid growth, China still only accounts for 6 percent of the world's total oil consumption and less than 3 percent of the world's total oil trade. That's despite the fact China is now the world's No. 2 importer after the U.S. with domestic production falling rapidly.

Whatever the case, China's growth is certainly significant: While the Chinese economy grew by an official 9.7 percent during the first six months of this year its oil imports jumped 40 percent. Some forecasters the ones not predicting a "hard landing" say that the Chinese demand for crude will increase annually by 12 percent until 2020.

China has not only become a new heavy addict of the world's oil teat, it is one of the worst offenders in terms of efficiency. To generate every $1 of GDP, China uses three times or more as much energy as the global average, 4.7 times more than the U.S., 7.7 times more than Germany and 11.5 times more than Japan.

Unless a "hard landing" produces a Japanese or Korean style bust, Chinese oil consumption and imports are going to keep climbing. And so is the inefficiency of use.

China is well on its way toward replacing a big part of its 1 billion bicycles with cars. Manufacturers produced only 220,000 vehicles in 1999. Last year they produced more than 2 million, an 81 percent increase over just the previous year. With 24 million cars operating in 2003, the People's Republic is projected to have 60 million private automobiles by 2010 and 130 million by 2020. If those straight-line projections or anything like them work out, oil for transportation alone will account for half of the total consumption.

Again some industry analysts point out the annual average fuel consumption per car in China is 2.28 tons, 10 to 20 percent higher than the United States twice that in Japan.

No wonder that "Liberating Taiwan," a recently published book from the Chinese Military Publishing House, makes capturing the Southeast Asian Mideast oil route a part of a dramatic war scenario.

Copyright 2004 East West Services, Inc.

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