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"September 11" Arousing Attention on China's Oil Security

Just like many other past major events or incidents impacting the development chain of world economic operations, "terrorist attacks September 11" in the US have come to be strongly felt all the same on oil.

And as things stand in world oil market, there has been seen earlier an abrupt rise to US$31 per barrel of oil after the "attacks September 11" in the US though OPEC had thrown its weight to keep the price down to a level of US$28 per barrel.

Moreover, for an imminent showdown between the US and Afghanistan facing the world people and the geographical location of Afghanistan astride Central Asia and the Middle East, what conflicts could be brought about and to what extent could these be developed? What impacts and unpredictable price fluctuations could be produced and exerted in the world and on China in the years to come?

Since facing such a situation, China can in no way take these lightly, according to Zhu Xingshan, deputy director of Economic Center of Energy Research Institute. "For the impact of "attacks September 11" is not merely on oil price rising in the case of China". "China has to reconsider its strategy of oil security and to secure oil supply and stave off risks it must adhere to a strategy for multi-channel supply of oil, he said. In 1999, oil imports by China from the Middle East were about 46.2 percent of oil it consumed along with 18.7 percent from the Asian Pacific region and about 19.8 percent from Africa. A fact to be noted is that of China's oil imports its oil purchases passing through the Strait of Malacca rose to as much high as 64 percent when facing various insecurities as pirates run wild and passage congested, long under the control of the US.

In view of these insecure factors, we have ever thought about laying pipelines to increase oil supply from Central Asia and Russia and we have even reached agreement to that end with Russia. "But since there have happened the "attacks September 11" in the US, some changes have to be made to such a strategy". Zhu Singshan reiterated that terrorist attacks September 11 have objectively provided a pretext for the US to enter Central Asia in a way to complicate an environment originally simple. This will be of far-reaching significance to the strategy for oil supply in China, he said.

As things stand in the world today, China imports an annual amount about one third of its oil demand. In contrast, the US imports an annual amount about 50 percent of its oil consumption. In view of the fact China still relies on coal in its energy supply China still enjoys greater safety in energy supply. With the development of economy greater oil supply will be needed and for a raise of efficiency more oil will be used in the place of coal. A most conservative estimation tells that by 2020 China's oil imports will take half of its total oil demand, so "we must step up the work to put in place a strategy for oil reserve"

The 10th Five-year plan has put the problem of oil reserve on agenda in China. Zhu Xingshan said that oil reserve should not simply mean to stockpile oil but must be on a sound mechanism to be formed. A good job of legislative work must be done." He suggested that on the one hand the government should set up a state strategic reserve to be placed under central control with investment made by the central government to cope with emergencies for cut oil supply. On the other hand, legislative measures and preferential policies must be used to encourage oil enterprises for setting up and increasing commercial oil reserves supplementary to state strategic oil reserve. This demands first of all legislation of relevant laws for a national oil reserve system to be built.

Still, greater input must be made in technological research for developing liquefying of coal. Zhu Xingshan said that for long years in the past we had neglected the work of developing liquefying of coal to obtain oil for high costs incurred and serious damages to be brought to environment. But since after the "attacks September 11" in the US we have to make some change to this line of our thinking. Though by this is not meant an immediate development of the technology for developing commercial liquefying coal production yet preparations must be well made in advance to raise the country's oil security in oil supply.

Zhu Xingshan points out that "by now there are two main factors to trigger possible new oil crisis: One is an alliance by the Arab countries and with oil as a weapon to boycott and limit oil production for fighting against the US. A fact is that history has seen no lack of such combats of force though new crisis seems so imminent as things are now in the world. Two, new retaliatory terrorist attacks are to be launched on the US, as on main oil transportation lines and major oil facilities. These can not be entirely excluded without doubt as what has happened September 11 in the US should new disasters strike again like that and trigger new oil crisis there would possibly a universal slump of global economy, warned Zhu.

Zhu Xingshan cautioned that "we should see to it that good preparations be made against all possibilities and eventualities since things stay not all that clear in today's world."

(People's Daily 09/23/2001)

Oil Policy Unaffected by Attacks
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