Edmonton Journal
China's growing appetite for energy has caused widespread concern around the world.
The Middle Kingdom is blamed for the sharp increase in global oil prices in the past few years. The United States is uneasy about Beijing's evolving cosy relations with major oil producers such as Iran, Saudi Arabia, Sudan and Venezuela, many of which are hostile toward Washington. And there are growing calls for containing China as an energy threat in a world of diminishing resources.
But many Chinese are resentful of such attitudes. Rather, they argue that China is the victim of mounting oil prices. In 2004 alone, Beijing spent an extra $7 billion US of its foreign exchange due to climbing oil prices, with payment totalling more than $43 billion US, making oil the country's largest single import item.
While the Western mainstream holds that the global increase in demand -- especially from China and India -- and decreasing spare production capacity will keep oil prices high, Beijing sees the real cause of high oil prices as manipulation of the energy markets by Western government-backed, profit-seeking "international petroleum crocodiles." Reports of huge earnings by Western energy firms only enhance such perceptions.
When the U.S. Congress voted overwhelmingly to block the sale of American energy company Unocal to China's National Offshore Oil Corp. last fall, it became further proof to many in China that the United States doesn't play by market rules -- its intention is to halt China's pace of modernization by keeping energy prices dear and keeping Chinese firms out of the global energy equity market.
CHINESE ENERGY FIRMS BITTER
Chinese energy companies are keenly aware of the volatile situation and high risks involved in their energy investment ventures in Africa, the Middle East and Latin America. And they are bitter when Western media accuse them of being in bed with dictators or "rogue states" as defined by the United States.
Given the perception gap, the recent Chinese debates on energy security have resulted in some people strongly advocating for a speedy buildup of China's navy in order to protect vital energy shipping routes.
Currently, a popular Chinese online novel, The Battle in Protecting Key Oil Routes, depicts a war scenario in 2008 near the Strait of Malacca where the Chinese navy destroys the entire U.S. Pacific carrier group in a decisive sea battle.
But more seriously, all Chinese government officials who talk about energy nowadays emphasize that China is not just the second-largest energy consumer on earth but also the second-largest energy producer, with only six per cent of its annual energy needs coming from abroad.
They quote statistics that China accounts for only three per cent of overall global oil trade. The psychological impact of the dragon's thirst for oil aside, this does not seem to be the number that will drive up energy prices.
Beijing also announced recently that China's demands for external oil grew by only 3.3 per cent last year, which is more than 30 per cent lower than in 2004. "China will import less oil and oil products in 2006 than in the previous years," says Lu Jianhua, director of the foreign trade department of the Ministry of Commerce. "It is unfair to blame China for the rising international oil prices."
Meanwhile, China has begun to implement a range of policies to boost domestic energy exploration and production, together with energy diversification and conservation measures. We also hear that China is not in a hurry to fill its strategic oil reserve under current conditions, and that the newly added electricity supply will meet China's demands this year.
Such a calculated move reflects at least four policy priorities of the Chinese leadership on energy security:
- China is refocusing on the self-reliance strategy that depends primarily on domestic energy sources to meet economic development needs;
- Beijing's drive to increase energy and power production to satisfy the explosive demands for energy in the past two years has some initial success;
- China does not want to be seen as so desperate for oil that it would pursue a scorched-earth strategy for energy acquisitions around the world;
- China is learning to play the psychological game in the global marketplace by lowering expectations of China's demands for oil, thus taking away what Beijing believes to be an unjustifiable excuse for big Western oil companies to increase oil prices.
It may well be the case that China's energy demand will slow down substantially this year. It is also true that China, with 22 per cent of the world's population, consumes just over six per cent of global oil production while the United States, with only five per cent of the world's population, uses 20 per cent of the world's daily oil supply.
On a per capita basis, the Chinese only consume a fraction of the oil that their American counterparts do.
BIG GREENHOUSE GAS EMITTER
But China remains the second largest emitter of carbon-dioxide after the Unites States; most of its cities and rivers are severely polluted; it burns three times as much energy as the global average and many times more than industrialized countries in producing every unit of GDP; and it is willing to spend $150 billion on renewable and alternative energy in the next 15 years.
Instead of blaming Beijing for its energy demands or containing China as an energy threat, industrialized countries should seize China's vast energy market potential in technologies of energy conservation and efficiency, environmental protection techniques and know-how, renewable and alternative energy production, and joint-efforts in managing global warming.
A co-operative approach to solving common energy securities concerns between China and the West will moderate Beijing's foreign policy behaviour, thus making easier the task of solving tough issues such as the ongoing Iranian nuclear crisis.
Wenran Jiang is the director of the China Institute at the University of Alberta.