China's Oil Demand and the Global Market
STEVE INSKEEP, host:
And let's find out where the energy market is going next. China's demand for oil in recent years has helped to push up gas prices in the US and there are other reasons for high prices, too--unrest in the Middle East, Hurricane Katrina, a lack of refining capacity. Some analysts believe that a slowdown in China's thirst for oil could help stabilize world markets. NPR's Chris Arnold reports.
CHRIS ARNOLD reporting:
Last year, China accounted for about 30 percent of the world's new consumption of oil. That caught many in the industry off guard, because China's demand for oil was growing even faster than its overall economy. Johannes Zutt is the World Bank's program coordinator for China.
Mr. JOHANNES ZUTT (World Bank Program Coordinator): There were extraordinary events that contributed to a surge in demand.
ARNOLD: For one, China had serious problems in 2004 with electrical power shortages that led to a large spike in the use of diesel generators by many companies. Also, power plants had trouble getting coal, so they themselves had to burn diesel. And there was a lot of growth in energy-intensive industries in China. This year, though, more power plants are coming online and Zutt says the Chinese government has been trying to slow economic growth to within a more sustainable range.
Mr. ZUTT: The government imposed a series of administrative measures to slow investment in some of these sectors, like real estate, steel, cement.
ARNOLD: The growth in China's oil consumption has slowed dramatically from an increase of around 860,000 barrels a day in 2004 down to an estimated 230,000 barrels a day this year, according to the Centre for Global Energy Studies. Analysts say that's actually helped to stop oil and gasoline prices from rising even more than they have, and some analysts are hopeful that the trend may continue, nut others are skeptical. Ed Morris(ph) is an executive adviser at HEDCO(ph), a New York trading company.
Mr. ED MORRIS (Executive Trader, HEDCO): It is really unclear whether the real rate of underlying growth--I don't think that necessarily has slowed down in China. So I think we've seen a pause on the demand side and not much more than that yet.
ARNOLD: Morris says part of the reason China didn't import more oil in 2005 is that it was using up its reserves while oil was so pricey, and he thinks the increase in China's demand for oil will now start to rise back near the very steep rate of 2004, which would not be good news for those hoping to see cheaper oil and gasoline prices.
Chris Arnold, NPR News.
INSKEEP: This is MORNING EDITION from NPR News. I'm Steve Inskeep with Renee Montagne.