Why, In China, Gas Is $2.49 A Gallon

China’s strong economy and huge appetite for energy have been key drivers in the current $130-per-barrel price of oil. China imports over half of its oil, regards the industry as “strategically vital,” controls retail prices and is facing inflation in excess of 8%. The price may seem daunting in the U.S., but it is much more so in China.

Here are China’s current oil sector particulars: Domestic production is about 4 million barrels a day, and that figure is rising very slowly. I have found no credible energy expert who expects Chinese production to rise meaningfully above the current range anytime in the foreseeable future.


Current consumption is now about 8 million barrels a day and rising at a rapid 7% annual rate, the highest growth rate in the world. Remember that China is becoming more energy efficient with each passing year–10% real gross domestic product growth, compared with 7% energy use–in line with its historical economic development pattern.

But China has been the primary contributor to the increasing oil demand over the last decade; its demand grows 65% faster than the U.S. and four times faster than India. Over the next decade, I don’t foresee much change in oil’s share of total energy use in China, compared with coal, natural gas and other forms of energy. Energy source substitution is difficult, expensive and takes time.

So, China is now required to import around 4 million barrels of oil a day just to keep its economy going. China has been a net importer of oil since 1993 and exports essentially no oil. Oil imports are likely to rise about 0.5 million barrels a day each year with a healthy Chinese economy. Using a round number of $100 a barrel, China’s annual current oil import bill alone is about $144 billion, up about $72 billion this year alone. It’s a big number.

Beijing is left wondering, first, how to handle the short-term price shock and, second, what the best long-term strategy would be.

Forbes