Posted by Martyn.
The current fuel crisis in China is getting worse. The fuel shortages that have recently plagued China’s manufacturing hub of Guangdong Province for the last couple of months have now reached both Shanghai and Beijing. According to both Chinese newspapers and the Beijing correspondent of the UK Telegraph, 60 petrol stations in the Beijing area have now stopped selling 90-grade petrol (standard fuel used by small cars and taxis). Beijing taxi drivers, like their Guangzhou counterparts, are already complaining about both the price of fuel and the long queues at petrol stations in the capital.
As reported on this site several weeks ago, unlike most other nations, China’s government is under pressure from its own national oil refiners, SinoPec and PetroChina, to actually raise the price of domestic oil. As petrochemical companies around the world continue to make huge profits, the Chinese refiners are losing billions of yuan, with no end in sight.
The row is a test case for a government caught between the need to keep its hell-for-leather growth going and to deal with unsustainable, underlying economic flaws. Everyone agrees that China will have to stop controlling the price of oil as it does now, for economic and environmental reasons. But they also fear the effect on energy-reliant industry.
With company profitability tight, a rise in fuel prices could be a blow too far. Zhang Guobao, deputy director of the powerful National Development and Reform Commission, told reporters a price rise could trigger inflation which would “affect the livelihoods of millions along with government expenditures”.
China’s State Information Centre (SIC) estimates that China will import approximately one billion barrels of crude oil this year, or over 40% of its oil requirements. Therefore, skyrocketing crude oil prices mean billions of dollars in extra payments for imported oil. For example, a US$10 per barrel increase would cost China an additional US$10 billion per year. China already has the world’s largest oil trade deficit in the world.
While global economists are correct when they cite basic economic principles and state that China can only solve the worsening oil price problem by raising domestic prices, what they don’t see are the hundreds of millions of Chinese people who would be adversely effected by either an initial price hike or the knock-on effect of rising prices/inflation. The vast majority of Chinese people do not drive BMWs and do not wear Patek Philippe watches. Even in the big cities, a lot of people scrape by on between US$50-250 a month.
No wonder the government are reluctant to quickly raise prices.
UPDATE: Don’t miss Sun-Bin’s latest post on China’s oil industry: Part 3 – Oligarchs and deregulation. It’s a Blogspot site unfortunately and, although Sun-Bin has kindly set up a mirror site for us China residents, the oil post isn’t up yet. China residents can therefore access Blogspot via this link.
1
By Luke
As the post implies, there’s no way the government can raise gas prices to reflect the international price. The ccp would instantly have a nationwide riot on their hands.
It is true that economists preach about what china should do but they are not the ones responsible for keeping the peace in the world’s most populous country.
Tricky situation.
September 17, 2005 @ 2:36 pm | Comment
2
By chris
i find myself looking for a new job in beijing right now…perhaps not the best time.
September 17, 2005 @ 3:27 pm | Comment
3
By Kieran
Shouldn’t be a problem Chris unless you intend to drive a taxi!
When fuel prices go up, the number of taxis will decrease as some drivers will inevitably move on to other opportunities as fuel costs cut into their take-home pay.
This should be good news for Beijing residents! I am in Shanghai but I’ve heard that Beiijng trtaffic is getting worse and worse.
September 17, 2005 @ 4:32 pm | Comment
4
By chris
that still spells trouble for all of us, as im sure they will have to increase the low cost of the taxis. im hoping the subway expansion is ready soon, we need it badly. the buses are over crowded, and the traffic is a mess, as im sure u know. i already spend way to much on taxi fares…i may soon be bussing it unless i find a pretty good job.
September 17, 2005 @ 5:24 pm | Comment
5
By shulan
The traffic situation in Shanghai is not very good either. Though they expanded one of the subway lines since I have been here the last time, public transportation is still very poor. Moving here during daytime is hard work. Fellt just exhausted after one day of moving around here. Friends tell me it is not their job that gives them the most stress but going there and back home. I can not imagine how it would be without taxis espacially if you want to go around after 10 pm. Still do not understand whay they close the subway that early.
September 17, 2005 @ 8:57 pm | Comment
6
By Fat Cat
Judging from what’s happening in China, it seems that petrol prices worldwide have gone mad. In Australia, prices have gone so high that they are starting to hurt many families. Last Thursday, some trade unions are putting forward proposals for a nationwide AU$50 a week salary increase. If this proposal goes through, many small businesses will be forced to close down. Major oil companies here keep predicting in the past 2 months that petrol prices have peaked and will come down again soon. As yet we are still waiting for it to happen. What in fact are the reasons behind the recent fuel shortage? Could someone enlighten me?
September 18, 2005 @ 4:10 am | Comment
7
By Ivan
Fat Cat,
It’s not just a “recent” fuel shortage. Oil exctraction has reached its peak – ie, half of all the known oil in the world has been used up now (forever, gone) and the remaining half is harder to extract even with the best technology. And demand has continued to rise worldwide.
America has been the worst culprit in wasting petroleum for the last 50 years or so, but hardly anyone in Washington has ever had the guts to offer any leadership on this problem, because nobody wants to bear the bad news to the American public: That their suburban “development” and all their idiotic highways and cul-de-sacs and the entire infrastructure of the American economy has all been built on sand, and it’s no longer sustainable.
September 18, 2005 @ 4:21 am | Comment
8
By Martyn
Fat Cat, do you mean the fuel shortage in China?
Yes, the problems you describe in Australia are precisely what the Chinese govt are keen to avoid here. If the tens of thousands of taxi drivers in China’s cities were cats, they’d be lashing their tails at the moment. The govt has managed to keep them at bay (in the face of raised fuel charges) with a few temporary solutions such as reducing the monthly taxi fee and adding a 1 yuan fuel surcharge to each passenger trip.
However, the govt simply can’t keep asking the refiners to continue bleeding money indefinitely, prices must go up sometime.
I think this is the fourth post I’ve written re fuel in China. Let me know if you missed any of the previous posts and I’ll dig up the links for you Fat Cat mate.
September 18, 2005 @ 4:33 am | Comment
9
By Ivan
PS,
And oil prices have not gone “mad”.
Quite the opposite, now the prices are becoming more realistic. The real madness was in all the shortsightedness of the past 50 years, the assumption that cheap oil would go on forever and that we could plan our futures on that assumption.
I’m also amused (grimly) at how the American “Christian” fundamentalists deny evolution in one breath and then waste lots of dinosaur juice every day. I guess they think they’re driving on Jesus Juice. The American Fundie version of Holy Communion:
“When the supper was ended he took the cup, filled it with petroleum, gave it to his disciples and said: This is my blood, the blood of the new and everlasting covenant, which will be shed for you and for all men.
Burn as much of this as you can, and do this in memory of me.”
September 18, 2005 @ 4:33 am | Comment
10
By Fat Cat
Ivan, I agree with you. You think that by now someone would have come up with a sustainable alternative energy plan. But no. In fact some of the research projects here that I know of are seriously under-funded.
September 18, 2005 @ 4:39 am | Comment
11
By Fat Cat
Thanks Martyn, that’ll be great. Work is taking over my life at the moment. I haven’t had a chance to read all postings on TPD lately.
September 18, 2005 @ 4:45 am | Comment
12
By Martyn
These two below posts should explain the oil situation within China, thanks:
Oil Wars
China’s looming oil crisis
September 18, 2005 @ 4:57 am | Comment
13
By Ivan
Fat Cat,
Sorry to break it to, well to anyone who didn’t know:
There is NO sustainable alternative energy plan, except to jettison the reliance on automobiles and on the idiotic suburban infrastructure which is based on them.
I mean there is no alternative fuel which can replace cheap oil. “Technology” can’t do it alone, not without, well, cheap sources of energy to RUN the technology.
And there are none. None.
The only “alternative” is not a source of fuel, but a change of habits.
Railways and public transportation for starters. A general (and painful_ scaling down is what is required.
But America’s suburban-sprawl infrastructure is simply not sustainable, period.
September 18, 2005 @ 5:13 am | Comment
14
By Ivan
Oh and also, get ready to use sea travel again, for private travel and for most international commerce AND for military.
The age of air travel (and of Air Forces) is ending, fast.
I know this bit will sound unorthodox and counterintuitive, but I predict Britain will be one of the better off world powers over the next century (or several centuries), as a maritime, island nation whose infrastructure (and geography) is more adaptable than America’s to dwindling oil supplies. The oil crunch will hurt Britain, but it will devastate America for a long time, I’m sorry to say.
Sea power will come back to the fore, very soon.
September 18, 2005 @ 5:20 am | Comment
15
By Sam_S
Quick observations:
France is probably more insulated from fuel shocks than even Britain, due to their huge conversion to nuclear power in the last decade or so.
SUV sales in the US are plunging. This is a good thing. Maybe rail travel will come back (don’t count on it).
We had a nice two weeks in Shenzhen, with noticeably less traffic and pollution. I suspect the shortage is rotating by region, as I can buy fuel freely in SZ now.
At $3.00 per gallon, fuel costs are about the same percentage of family income that they were 2-3 decades ago (in the US), but with the drop in SUV sales as partial evidence, I’ll bet that oil sustained in the $70-100 range will produce some real conservation measures. Used hybrids are fetching higher prices now than new ones…..because there’s no waiting list!
September 18, 2005 @ 9:28 am | Comment
16
By Daniel
What on earth are you going on about Ivan? Air travel is on its way out? Sea travel and the British Empire are going to make a comeback?!
September 18, 2005 @ 9:35 am | Comment
17
By Fat Cat
Ivan,
J
udging from the panic that petrol price increases and fuel shortages are causing in Australia and in China, I would agree with you that this is probably a wake up call for us to consider changing our living style and energy consumption habits, which have been elaborated to such an extend that they are no longer sustainable. Personally, I am committed to the use of public transport. I don’t drive unless it is absolutely necessary. People often ask how I can put up with the inconvenience. The fact is, I never find using public transport inconvenient. It’s a matter of planning my trips ahead and building it into my daily routine.
However, I don’t entirely agree with your view that alternative energy is not as economical as the cheap old oil. I think that this is what big oil companies and the governments that support them want people to believe. And that’s why there are no plans for its development. I visited a timber mill here a couple of months ago. They are using unmodified vegetable oil for powering their tractors as a part of a renewable energy project. They are happy with the result. However, they are forced to confine the use to only 2 tractors because under existing legislation, they are not allowed to carry out extensive oil treatment process where they are operating.
September 18, 2005 @ 9:25 pm | Comment
18
By Ivan
Fat Cat,
You say they’re using vegetable oil?
Good. Sure, it works. But do you know what we use to grow most vegetables today? Petroleum products.
There are other fuels, but nothing as abundant as petroleum has been, I mean nothing which can keep the suburban infrastructure going like oil did.
And it’s not the “oil companies” conspiratorially trying to con the American people. The main culprit is the American people who want to believe that they can carry on this way.
September 19, 2005 @ 1:10 am | Comment
19
By Ivan
Daniel,
The British Empire won’t make a comeback, but Britain will suffer less than America in times to come, because it’s compact and has decent railways and public transportation. (Well not great, but far better than America’s.)
Air travel is on the way out because it will just be too expensive for most people. Even now, two major American airlines (Delta was one) have gone bankrupt. You’ll see a lot more of that.
Or did you think oil was made by magic fairies? Did you think it comes from the Oil Fairy, who refills the wells every night, forever?
September 19, 2005 @ 1:17 am | Comment
20
By bocaj
@Ivan
I would be amiss if I didn’t point out that United/Delta/other large carriers are going broke because of piss-poor management and not fuel costs.
http://www.plastic.com/article.html;sid=05/09/16/08092060;cmt=51
A (rare) informative discussion on Plastic about the recent bankrupcy filings of NWA and Delta.
September 19, 2005 @ 1:51 am | Comment
21
By Ivan
Amiss?
September 19, 2005 @ 2:45 am | Comment
22
By Tian Li
China is the second largest emitter of CO2, emitting 668.73 million metric tons in 1999 (11 percent of the total emitted by all nations), the United States, which emitted 25 percent of the world’s CO2 in 1999 with 1,519.89 million metric tons, the ratio between the CO2 emitted and China’s Gross Domestic Product (GDP) is much less efficient than that of the United States. India uses three times the energy and emits four times the CO2 per unit of GDP as the U.S. does, while China fares much worse. China uses nearly five times the energy and emits eight times the CO2 per GDP unit as that of the U.S.
In 2003, China produced 0.74 metric tons carbon equivalent of CO2 per capita, a 40% rise from 1990.
China is among the countries with the lowest energy efficiency
China has become among the world’s most wasteful users of power, its growth in demand exacerbated by its striking inefficiency, say energy analysts and economists.
“A lot of China’s energy security problem could be solved if you improved our domestic efficiency,” said Yan Maosong, an industrial engineering expert at Shanghai University who advises the central government. “From generation to transmission to power usage, in every link of the chain, our energy industry is not very efficient.”
By the government’s own reckoning, China’s economic growth is absorbing energy at a higher rate than many large economies. To produce $1 million in gross domestic product, China needs 2 1/2 times as much energy as the United States, five times that of the European Union, and nearly nine times that of Japan, according to the state Energy Research Institute.
Making steel in China in 2003 consumed 10 percent more energy per unit than in the United States, according to state statistics. China’s electrical generators consume one-fifth more energy per unit of output than American plants, said Long Weiding, an expert at Tongji University in Shanghai. Chinese air conditioners — now the fastest-growing draw on power — are roughly one-fifth less efficient than the world average, Long said.
High and inefficient energy use may seem normal for poor nations going through industrialization and rapid economic growth. According to state statistics, China is more energy-efficient than fast-growing India. But much of China’s wastefulness stems from the hybrid nature of its economy, which is caught between its communist roots and a free-market future, experts say. More and more of the demand for energy comes from companies that operate on market principles, but the majority of the supply is generated by state-owned monopolies forged in the time of central planning and with little incentive to increase efficiency.
China’s production and consumption of coal, its dominant fuel, is the highest in the world.
Coal makes up 65% of China’s primary energy consumption, and China is both the largest consumer and producer of coal in the world. China’s coal consumption in 2003 was 1.53 billion short tons, or 28% of the world total. The Chinese government has made major upward revisions to coal production and consumption figures covering the last several years. The new figures show coal consumption rising sharply in 2001-2003, reversing the decline seen from 1997 to 2000.
Over the longer term, China’s coal demand is projected to rise significantly. While coal’s share of overall Chinese energy consumption is projected to fall, coal consumption will still be increasing in absolute terms.
China suffers from major energy-related environmental problems. According to a report by the World Health Organization (WHO), seven of the world’s ten most polluted cities are in China. The country’s heavy use of unwashed coal leads to large emissions of sulfur dioxide and particulate matter. China also is important to any effort to curb emissions of greenhouse gases, as it is projected to experience the largest absolute growth in carbon dioxide emissions between now and the year 2025.
China is a non-Annex I country under the United Nations Framework Convention on Climate Change, meaning that it has not agreed to binding targets for reduction of carbon dioxide emissions under the Kyoto Protocol.
China was the world’s second largest consumer of petroleum products in 2004, having surpassed Japan for the first time in 2003, with total demand of 6.5 million barrels per day.
Chinese officials have spoken of their intention to build a national strategic petroleum reserve, and announced that construction would begin on storage capacity for the reserve in 2005. The reserve will consist of three tank farms, co-located with major refineries, and will be built and filled in phases, with the first purchases of crude oil to fill the reserve beginning in the third quarter of 2005.
Total Energy Consumption (2003E): 45.5 quadrillion Btu (10.8% of world total energy consumption)
Energy-Related Carbon Dioxide Emissions (2003E): 3,541.0 million metric tons of carbon dioxide (14.1% of world carbon dioxide emissions)
Energy Intensity (2002E): 7,213 Btu/$nominal — PPP (vs. U.S. value of 9,348 Btu/$ nominal)
Carbon Dioxide Intensity (2002E): 0.55 metric tons of carbon dioxide/$nominal — PPP (vs. U.S. value of 0.55 metric tons/$ nominal)
Fuel Share of Energy Consumption (2003E): Oil (25.0%), Natural Gas (2.6%), Coal (64.8%)
Fuel Share of Carbon Emissions (2003E): Oil (20.8%), Natural Gas (2.0%), Coal (77.1%)
September 19, 2005 @ 12:06 pm | Comment
23
By bocaj
Main Entry: amiss
Pronunciation: &-‘mis
Function: adverb
1 a : in a mistaken way : WRONGLY b : ASTRAY
2 : in a faulty way : IMPERFECTLY
September 19, 2005 @ 9:17 pm | Comment
24
By Simon World
Daily linklets 20th September
English in Hong Kong just ain’t that hot. The comparison is often made with Singapore. The difference is Hong Kongers are conent with Cantonese and the Government does not force English down people’s throats…and just as well given how badly the Gove…
September 19, 2005 @ 10:11 pm | Comment
25
By Shenzhen Ren
Sinning (on China’s dime)
We had a couple of good/bad weeks here. There was a fuel shortage, indirectly caused by the central government’s policies. Our car was down to a spoonful in the tank after a couple of failed attempts to buy gas (Mei You!) “None!” at the pumps.
So …
September 19, 2005 @ 10:36 pm | Comment