The price of China’s growing thirst for electricity

SHANGHAI BUND BY KATHY FONG

CHINA as the world's factory has often been referred to as a thirsty nation. The country needs much electricity for its factories and what more now with many affluent Chinese driving instead of cycling.

The surging energy consumption in this vast country has been blamed by the international community for partly causing the upward spiral in crude oil prices.

China’s oil demand rose 15% to about 290 million tonnes last year – a growth five times higher than the world’s average of 3.2%.

The sharp rise in China’s imports had caught the market off guard last year. The Chinese bought 35% more crude oil, becoming the second-largest crude oil importer after the United States.

The jump in import was said to have propelled crude oil prices to above US$50 (RM188) per barrel. Crude oil prices are currently at the US$65 (RM245) level.

But, the breakdown on the global oil consumption shows that China accounted for only 8.3%, whereas 25% of usage was in the United States last year, according to statistics from British Petroleum.

“People have been fretting about the rising oil import of China. However, most of them are not aware that China is also a big energy exporter,” said Zhang Guobao, vice-chairman of the National Development and Reform Commission (NDRC), the country’s economic planning agency.

In its defence against the argument that China was pushing up oil prices, Zhang said China was a major coal and coke producer – the country supplied 94% of its own energy consumption last year. The rate is among the highest in the world.

Zhang also highlighted the ratio of petroleum in China’s energy consumption structure as only 24%. Nearly 67% of its energy needs were met by coal.  

Given that a large rural population had yet to gain access to electricity, China’s current primary energy consumption per capita is only one-third of the world’s average.  

Like it or not, the world has to accept the reality that China’s energy demand is growing as industrialisation continues and affluence increases in this country of 1.3 billion people.

Perhaps, the more critical issue in the current high oil prices era may be energy conservation and efficiency, particularly among big consumers.

China’s national news agency Xinhua reported that the country needed 2.4 times more energy to produce one unit of output compared with the world’s average, and nearly five times more than Germany and 1.65 times more than India.

China is definitely lagging in terms of energy efficiency. If the inefficiency continues, oil wells will dry up faster than expected to fuel the growth of this emerging economic giant.