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Energy: Oil use soars in H1 despite high world prices

(Xinhua)
Updated: 2008-07-24 18:36

Soaring world prices don't seem to have crimped China's oil use, with statistics released on Thursday by an industry group indicating that first-half consumption of oil and refined oil products set records.

The China Petroleum and Chemical Industry Association (CPCIA) said that "apparent consumption" of refined products -- gasoline, diesel and kerosene -- rose 14.6 percent year-on-year to 106 million tonnes, while crude oil use rose 6.3 percent to 183.3 million tonnes.

"Apparent consumption" represents the sum of net imports and output, according to the group, and can be used as a proxy for real consumption excluding inventory.

Apparent consumption of gasoline rose 16.2 percent, that of diesel 14.7 percent and kerosene, 6.66 percent, according to the CPCIA.

The expanding economy, booming auto demand and reconstruction after the severe winter weather in southern China and the May 12 earthquake were the major causes of growing consumption in the first half, said Zhu Fang, a CPCIA researcher.

Gross domestic product expanded 10.4 percent in the first half, 1.8 percentage points below a year earlier but still a rapid pace.

The association's figures indicated that State price controls have led to unintended and even negative consequences.

For example, the State price ceilings caused an "abnormal" consumption rise through hoarding and smuggling abroad of refined products, said Zhu.

Below-cost prices did not restrain China's demand for oil but rather boosted it, said Niu Li, a researcher of the State Information Center, a government think tank.

According to the China Association of Automobile Manufacturers, sales of domestic cars increased 18.52 percent to 5.18 million units during the first six months, a high rate by global standards with markets in Europe, Japan and the United States hit by rising gasoline prices.

Below-cost fuel prices led to a low utilization rate at refineries and the ensuing supply shortage in most parts of the country boosted China's imports of refined oil products.

According to the CPCIA, net imports of oil products (gasoline, diesel and kerosene) stood at 4.3 million tonnes in the first half, up sharply from 2.8 million tonnes a year earlier.

Gasoline imports surged more than 3,000 percent and those of diesel rose 1,143 percent. Net crude oil imports stood at 88.97 million tonnes, up 11.6 percent. The trade deficit from oil and oil products doubled from a year earlier to $68.35 billion.

To reverse the trend, China raised benchmark gasoline and diesel oil retail prices by 1,000 yuan ($146.6) per tonne on June 20, with the price of aviation kerosene up 1,500 yuan per tonne.

The price rise, although insufficient by international standards, has restrained demand and thus relieved the country's supply problems, to some extent, said Zhu.