WATCHING THE WORLD: China parries price claims

Nov. 6, 2006
The Chinese are becoming defensive over claims that they are responsible for the rising cost of crude oil.

The Chinese are becoming defensive over claims that they are responsible for the rising cost of crude oil. Indeed, they recently trotted out a senior official to deny the claims.

Ma Kai, Director of China’s National Development and Reform Commission (NDRC), commented on the subject in Qiushi magazine, a publication of the Communist Party.

“The argument saying China’s surging demand for oil is a key factor in driving up oil prices is groundless. China will never pose a threat to global energy security,” Ma Kai wrote.

He said China’s net oil imports accounted for 5.5% of global trade volume in 2005, compared with the US’s 25% and Japan’s 10%.

Consumption falls

Ma Kai also pointed out that Chinese imports and consumption fell in 2005 but that spot prices soared by more than 40% the same year for West Texas Intermediate, IPE Brent, and Dubai crudes.

He noted that in 2005 China’s net oil imports were 136.17 million tonnes, which was 7.56 million tonnes less than in 2004-a strong year for imports-or an overall decrease of 5.3%.

If Chinese demand were driving the market, Ma Kai said, then “the global oil price should have dropped in 2005 instead of continuing to surge.”

One really wonders who could be making such accusations against China. After all, most people understand that in a world of tight supply and high demand, oil prices-like the price of cocoa or soybeans-will climb.

But it would be disingenuous of anyone to say that Chinese demand has not contributed to the higher prices. That’s something Ma Kai needed to address.

Demand increases

Evidence of that demand emerged last week when more than 40 African heads of state were in Beijing for the China-Africa forum. Of the 40 states, four of them-Angola, Sudan, Congo-Brazzaville, and Equatorial Guinea-were among the top 10 oil exporters to China in 2005.

Altogether, China imported 38.34 million tonnes of crude oil from Africa in 2005, accounting for 30% of its oil imports, another NRDC official said at a mid-October press conference on the forthcoming Sino-African cooperation forum.

Zhang Yuqing, deputy head of the NRDC’s energy department, said that by the end of 2005, China had invested in 27 major oil and natural gas projects in 14 African countries, including Sudan, Algeria, Angola, and Nigeria.

At the same time, Zhang noted that, according to official figures, China imported 126.82 million tonnes of crude oil in 2005, while its imports in the first 8 months of 2006 reached 95.80 million tonnes, up 15.3% on the previous year.

His figures don’t exactly match those of Ma Kai, especially the 15.3% increase of imports for 2006. While that 15.3% alone may not be enough to increase world prices, it certainly is a contributing factor. One wonders if Ma Kai saw it. That’s just a thought, of course.