Monday October 14, 2019

CHINA OVERTAKES U.S. AS WORLD’S LARGEST OIL IMPORTER

October 11, 2013

China passed the United States in September as the world’s biggest net importer of oil.  According to the Energy Information Administration (EIA), Chinese oil consumption outstripped production by 6.3 million barrels per day, indicating the Chinese need to import this extra oil to fill in the gap.  This was higher than U.S. where consumption outstripped production by 6.1 million barrels per day.  Additionally the EIA forecasts this trend to continue through 2014.

This new development is met by the top Chinese leadership with mixed opinions.  On the one hand, China’s economic boom has raised incomes and increased its global influence.  One the other hand, however, it has inspired demand for imported oil and gas, which is perceived by the communist leaders as a strategic weakness.

Until the late 1990s, China was able to supply its oil needs from domestic sources.  However, as the economic boom outstripped production capacity, China has been forced to rely more heavily on imports, namely from Saudi Arabia and Iran.

State-owned oil companies along with their foreign partners have invested heavily in searching for new oil sources in China, as well as developing alternatives such as methane from coal beds.  Moreover, Beijing is encouraging the development of wind and solar power, battery powered automobiles or natural gas.

Abroad, Chinese state-owned oil companies have invested billions of dollars in developing oil and gas sources in other parts of the world, specifically in Iraq, Central Asia, and Africa.  While a portion of the oil produced is meant for export to China, much of it is sold in other markets.

Despite all of this, it is important to note that China’s energy consumption in absolute terms and per capita is still lower then that in the United States.  For example, according to the latest EIA data, the U.S. used 18.6 million bdp of oil and other liquid fossil fuels in September, while China only consumed 10.9 million bpd.  This is an exceptionally stark difference in per capita terms, due to the fact that China has over a billion more people than the United States.  The U.S. however, is increasingly able to support itself after the development and growth of domestic hydraulic fracturing, or fracking.

Jason Gammel, the head of European oil and gas research at Macquarie, a global investment bank, said that he expected America to produce 20-22 million barrels of oil per day by 2022. Mr. Gammel also states that this type of approach would be difficult for the Chinese to implement due to the high level of development and infrastructure needed for fracking.

So what is the best course of action for China then?  An article in the Diplomat written by Zachary Keck, argues that as China continues to urbanize and see the growth of the middle class, energy consumption will continue to increase.  This may be abated slightly if China can learn how to create greater efficiencies, as the United States has been able to.  Mr. Keck quotes a Time magazine report, saying, “The U.S. gets twice as much economic value out of a single unit of energy today as it did in the 1980s and we’ll keep getting more in the future.” This, he argues, is the model that China would be wise to emulate.

 

For further coverage of China overtaking the U.S. in oil imports please visit the following news sources and commentary

The Diplomat- “It’s Official: China’s the World’s Largest Oil Importer”

CNBC” Data show China passing US as biggest oil importer”

The Wall Street Journal “China to Overtake U.S. as World’s largest Oil Importer, OPEC says”

BBC News “China overtakes US as the Biggest Importer of oil”

compiled and edited by Madeline Fetterly