China’s latest surge in oil imports has taken experts by surprise after the government raised fuel prices twice in hopes of cooling down demand.
Customs statistics released June 12 show crude oil imports were 19 percent higher last month than they were in May last year.
China’s appetite for foreign oil has been growing nearly twice as fast as the economy, while domestic oil production has risen only 1.9 percent in the first four months of the year.
Sinopec delays purchases
In interviews with Radio Free Asia, analysts said the big jump in imports shows Chinese oil company Sinopec was delaying purchases for as long as fuel prices were kept low.
Philip Andrews-Speed, a China energy expert at the University of Dundee in Edinburgh, Scotland, said the sudden surge in imports came as a surprise because analysts were focused on demand.
“And we were caught out, because the suppliers—that is, the importers and refiners in China—were able to react immediately to the higher prices and start importing and refining more crude oil to sell to the market.”
And we were caught out, because the suppliers—that is, the importers and refiners in China—were able to react immediately to the higher prices and start importing and refining more crude oil to sell to the market,
The surge may end, though, Andrews-Speed said, as oil companies stock up on inventories for refining and the effect of higher fuel prices begins to be felt.
China’s government may need to raise fuel prices again to curb demand, he added.
But China’s oil imports may also continue to rise because the country’s investment-driven economy shows no signs of slowing.
In the first quarter of this year, gross domestic product grew at a rate of 10 percent, far above the targeted annual limit of 8 percent announced earlier by premier Wen Jiabao.
China’s oil consumption can be estimated only from month to month.
And tracking consumption will become even harder when China completes the first storage facility for its strategic petroleum reserve at Zhenhai, in Zhejiang province, south of Shanghai.
On June 16, Xu Dingming, director of the Energy Bureau of the National Development and Reform Commission (NDRC), refused to say when China would start to fill its reserve.
"We have our own solutions," he said in a report carried by the official China Daily, "but I won't disclose them."
Robert Ebel, chairman of the energy program at the Washington-based Center for Strategic and International Studies, said that China’s customary secrecy makes it hard to tell whether increased oil imports are going into storage or consumption.
“We can construct any number of scenarios to try to explain what’s happening,” Ebel said. “But I can’t tell you which of those scenarios might be correct and which are false.”
Ebel said these questions about China create uncertainty in the world oil market.
“We’re trying to figure out what’s going to happen and trying to explain away what has happened, but we’re not doing a very good job because they’re not very transparent.”
Original reporting by Michael Lelyveld. Edited for the Web by Richard Finney.