China’s Growing Thirst for Oil


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China’s Growing Thirst for Oil

  1. 1. China’s Growing Thirst for Oil Zach Evans Managerial Economics March 6, 2004
  2. 2. China’s Growing Population
  3. 3. China’s Growing Thirst for Cars <ul><li>3.2 million: demand in 2002 </li></ul><ul><li>4 million: estimated demand in 2003 </li></ul><ul><li>6 million: estimated demand by 2005 </li></ul><ul><li>Reasons: </li></ul><ul><ul><li>Removal of curbs on individual ownership of cars </li></ul></ul><ul><ul><li>Lowest retail price of gasoline of all major economies, developed & developing </li></ul></ul><ul><li>Over next decade, total cars on Chinese roads will grow fivefold to 100 million </li></ul>
  4. 4. China’s Oil Situation <ul><li>2 million barrels or about 270,000 tons a day </li></ul><ul><ul><li>Up 30% through first 10 months of 2003 </li></ul></ul><ul><li>Will double to 4 million barrels a day by 2010 </li></ul><ul><li>Will rise to 9.8 million barrels or 1.35 million tons a day by 2030 </li></ul><ul><ul><li>Roughly what the U.S. brings in now </li></ul></ul>
  5. 5. China’s Oil Situation (cont.) <ul><li>Domestic production is flat </li></ul><ul><li>2003 & 2004: China expected to account for 1/3 of increase in global demand for oil </li></ul>
  6. 8. China’s 21 st Century Oil Strategy <ul><li>Diversify the sources of oil imports </li></ul><ul><li>Co-develop oil and gas wells with and in other countries </li></ul><ul><li>Set up national oil reserves and security guarantee mechanism </li></ul><ul><li>Initiate National Oil Foundation to conduct platform for oil finances and futures </li></ul><ul><li>Re-start the National Energy Commission to deal with oil security affairs </li></ul><ul><li>Cut out some reliable marine oil transportation lines </li></ul><ul><li>Prepare four strategic oil preserves in northwest China </li></ul><ul><li>Encourage frugal and efficient oil consumption </li></ul><ul><li>Organize a couple of large oil corporations </li></ul><ul><li>Restructure energy consumption to reduce dependence on oil </li></ul>
  7. 9. China’s Options <ul><li>Has ample coal resources, which make up 70% of its fossil energy makeup </li></ul><ul><li>Has huge resources of hydropower in its southwest region and along Yangtze River </li></ul><ul><li>Great potential of more oil and gas reserves </li></ul><ul><ul><li>94 billion tons </li></ul></ul><ul><ul><li>38 trillion cubic meters </li></ul></ul>
  8. 10. China & Russia: A Partnership <ul><li>China is expected to more than double imports from Russia by 2006 through a proposed rail link </li></ul><ul><ul><li>Runs from East Siberia to Northeast China </li></ul></ul><ul><ul><li>Will ship 700 million tons of Russian crude over the next 25 years </li></ul></ul><ul><li>Has agreed to buy 10 million tons annually </li></ul>
  9. 11. Fears Over China’s Situation <ul><li>Does not have a large strategic oil reserve </li></ul><ul><li>Might grow so desperate for oil that it will battle U.S. for influence in Middle East </li></ul><ul><li>Might trade weapons technology to terrorist states </li></ul>
  10. 12. Reason’s Not to Fear <ul><li>Increasingly depend on U.S. fleets to guard shipping lanes </li></ul><ul><li>Increasingly need stability in Middle East to ensure reliable oil supplies and prices </li></ul>
  11. 13. Sources <ul><li>A Choice of Urban Life-Style for China . Stanford University . November 2003. </li></ul><ul><li>Asia-Pacific in Figures 2002 . . 2002. </li></ul><ul><li>Evolution of Oil Products Consumption from 1971 to 2001 . . 2002. </li></ul><ul><li>China’s 21 st Century Oil Strategy Outlined . People’s Daily Online . 2004. </li></ul><ul><li>China’s Growing Thirst for Oil Remakes the Global Market . The Wall Street Journal . December 2003. </li></ul><ul><li>Rail link to increase oil imports from Russia . People’s Daily Online . 2003. </li></ul><ul><li>State to Upgrade Automobile Industry Policy . . November 2002. </li></ul>