For China, 2009 was supposed to be a year of economic slowdown and thus, lower energy demand. In the US, after years of increasing demand, oil consumption fell by about 5%, to about 19 million barrels per day.
That didn’t happen in China. After posting economic growth of 10.7% in the fourth quarter and 8.7% for the entire year, China is now poised to overtake Japan as the world’s second largest economy. And with that economic growth, oil consumption increased, going from 7.83 million barrels per day in 2008 to almost 8 million barrels per day in 2009.
More significant is that crude oil imports in 2009 reached 4.1 million barrels per day, a record high. China’s oil production was 1.38 billion barrels and net imports were 1.49 billion barrels. This means that for the first time in the country’s history, more than half, or 51.8% to be exact, of China’s oil needs came from foreign sources. The second significant fact is that China produced domestically 0.5% less oil in 2009 than in 2008, even after very extensive and expensive efforts to boost production. For 2010, Chinese officials are projecting a 10% increase in imported oil.
The psychological 50 percent threshold made China’s “energy security” an inevitable issue among the country’s national press, think tanks and the authorities. The deputy director of the National Energy Board Wu Ning warned in an article that “now the most acute problem in China is the increased importation of crude oil.”
Of course the events of 2009 were unavoidable. Since China became a net oil importer in 1993, the amount of oil from overseas increased from 6 percent to over 50% in merely 16 years. According to the China Social Science Academy, China’s oil consumption could reach 10.6 million barrels per day by 2015, and imported oil is likely to reach the US level of 65% of total consumption by 2020. It is estimated that China may need 16.1% of trade-able oil in the world market by 2020.
The dilemma for China is how to maintain economic development, even by tolerating environmental problems, while its domestic oil production cannot increase and it may have already peaked. Thus, some Chinese energy experts have proposed a “ceiling” for Chinese oil imports. But such ceiling will depend on China’s economic and societal development, as well as international situations. Since almost all of China’s oil is used for transportation and chemical processing, with the country having just 15 cars per thousand people (compared to almost 500 per thousand people in the US) a ceiling to limit oil use will definitely curb economic development but also affect China’s efforts to catch up to the US, a country they look up to.
Energy security for the Chinese takes a different hue than it does in the US. Although the US relies heavily on imported oil, it is perceived as controlling international oil prices and through geopolitical interventions it can become master of its destiny. In contrast, China views itself as a neophyte in energy geopolitics and is uncomfortable at any prospect of geopolitical disturbance where it is a mere bystander as is the case in Iran and earlier in Iraq. Thus, the strategy for China’s oil companies is to acquire more international oil reserves and the government is openly encouraging those moves. Expect massive purchases of foreign oil reserves by the Chinese in the near future.
