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Lawmakers, Political Advisors Concerned with Oil Security

The soaring international oil prices provoked by the imminent US war on Iraq have put Chinese lawmakers and political advisors on the alert to the security of oil supply in the country.

Some deputies now attending the annual sessions of the 10th National People's Congress (NPC) and the 10th National Committee of the Chinese People's Political Consultative Conference (CPPCC) called for the building up of strategic oil reserves and the seeking of alternative energy.

"If oil security is at stake, it will restrict China's rapid economic development," said An Qiyuan, member of the 10th CPPCC National Committee.

"It will take China 50 more years to accomplish modernization," said An, who is in charge of China's oil exploration. "Without enough energy, modernization would have become an empty word."

It was learned that crude oil futures jumped to nearly US$40 per barrel last week on the New York Mercantile Exchange. Many industries in China including aviation, automobile, toy and clothes processing have been affected by the sharp rise of oil prices. Even the ordinary Chinese citizens are feeling the pinch oil price fluctuations in their daily life.

Statistics from the General Administration of Customs show that China imported 69.41 million tons of crude oil in 2002, 15.2 percent more than in 2001 and nearly 60 percent of the imported oil comes from the Middle East.

According to the speed of China's economic development and energy consumption, especially the rapid growth of the number of private cars, there will be bigger shortages in the oil supply.

China became an oil-importing country 10 years ago. Experts predict that the oil demand in China will increase by 3-4 percent in 2003, and the consumption of oil products will reach 125 million tons.

An Qiyuan suggested that oil reserve should be built to ensure oil security so as to gain more leverage on international issues and increase economic efficiency and competitiveness of China's energy industry.

Huang Ligong, an NPC deputy and general manager of the Qinghai Oilfield of the China National Petroleum Corporation (CNPC), said that, "The possible war on Iraq will not have much impact on China directly, because China doesn't import oil from Iraq."

What are the biggest deciding factors influencing oil prices are big western powers and international capital, said Huang.

The fluctuations of oil prices once tested the bearing capacity of China's economy. In 2000, when oil prices soared, China spent an additional US$8 billion on importing more than 70 million tons of crude oil.

It is calculated that if the oil price rises US$10 per barrel and the situation lasts for a year, it will chop 0.5 percentage points off the annual growth of the world economy and 0.75 percentage points off the annual growth of developing countries. If oil imports of a country exceed 50 million tons, the international market price will affect the economic operation of that country. If oil imports exceed 100 million tons, it would become necessary to ensure oil supply security by diplomatic, economic and military means.

Building up oil reserves is an effective means to steady supply and demand, keep the prices stable, cope with breaking events and ensure the security of the national economy. All large oil consuming powers like the United States and Japan, and even some developing countries as Brazil, South Africa and India, have built their oil reserves, said An.

Building oil reserves is only part of the strategy to ensure oil security, said Huang Ligong. It is also necessary for China to diversify its sources of oil imports and encourage petroleum enterprises to develop oil overseas.

In addition, he said, China should set aside resource reserves such as sealing up some oilfields with verified oil reserves.

Xia Honghui, another NPC deputy and general manager of the Southwestern Oilfield of CNPC, said that China should further adjust its energy structure to reduce dependence on oil and continue to develop nuclear power and gasify and liquefy coal.

The proportion of nuclear energy in China's energy structure should be raised from the current 1 percent to 4 percent by 2004, Huang said.

Some experts proposed trading of oil futures so as to end, step by step, the passive situation of accepting oil prices of the world.

It was learned that the Shanghai Oil Exchange would be restored under the sponsorship of CNPC, Sinopec and CNOOC together with the Shanghai municipal government.

(People's Daily March 10, 2003)

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