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Diverse Oil Consumers en Route to Cooperation
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By Niu Li

Energy ministers from China, the United States, India, Japan and the Republic of Korea (ROK), five of the world's primary gasoline consumers, got together in Beijing on December 16 to discuss energy security and sustainable development of the energy sector.
The energy ministers agreed that the guarantee of a reliable and sufficient supply of reasonably priced energy resources and increased energy efficiency are what their countries are after.

The meeting was not aimed at keeping down international oil prices and will not develop into a mechanism to counterbalance the Organization of Petroleum Exporting Countries (OPEC), despite media suggestions to the contrary.

In recent years, international oil prices have fluctuated by large margins. This not only greatly impacts the world economy but leaves oil consuming countries continuously worried about energy security, with developing countries the hardest hit.

On July 17, 2006, President Hu Jintao, attending the dialogue session between G8 and developing countries in St. Petersburg, Russia, suggested that a new energy-security approach be introduced. It would be based on global energy stability, sustainable development and mutual benefit.

Against this background the Chinese government proposed convening the energy ministers' conference.

The population of China, India, Japan, the ROK and the United States totals some 2.85 billion and the five countries consume 45.3 percent of the world's oil. So the five share major common concerns over energy.

The ministerial meeting concentrated on five subjects: energy security and strategic oil reserves, diversification of energy structure and alternative energy forms, investment and the energy market, primary challenges to international energy cooperation, energy saving and enhancement of energy efficiency.

Ma Kai, minister of the State Development and Reform Commission, put forward six proposals involving cooperation in energy saving, alternative energy resources, oil reserves, energy information exchange, research on advanced technologies and boosting energy supply.

The joint statement issued by the conference urges that an energy resources market be introduced, based on transparency, efficiency and fair competition.

This market, with an effective legal and supervisory framework, would encourage investment in oil and gas prospecting and exploration.

The statement also pushes for the diversification of energy supply sources and the development of effective energy-saving technologies.

In addition, it presses for increased strategic oil reserves to cope with possible energy crises.

The joint statement also suggests that major energy facilities and oil-shipment sea routes be protected.

The five-country energy ministers' meeting sends a signal to the international community that some of the world's primary oil consuming countries will strengthen dialogue and cooperation among themselves to promote energy saving, energy efficiency and the development of alternative energy resources to lessen consumers' excessive dependence on gasoline.

The fact that the five oil consumers got together is in itself an important event.

In 2005, the five countries consumed a total of 1.737 billion tons of oil, 45.3 percent of the world's total. Looking ahead, as the Chinese and Indian economies develop on the fast track, their consumption of oil will increase dramatically.

In this scenario, it is feasible that the major oil consumers strengthen cooperation to avoid cutthroat competition among them. This helps stabilize the world oil market and encourages its orderly development.

In addition, the sharp oil price hikes in the international market have already brought negative impacts on the world economy, which hits developing countries the hardest.

The energy ministers' meeting is of great significance in promoting global energy security.

Some media reported that the five countries would work together to keep international oil prices down.

This seems an impossible task.

A host of ever-changing factors influence international oil prices. Even organizations such as the International Energy Agency and OPEC can only play a limited role in oil pricing.

Energy cooperation among the five countries is geared to seeking common interests. Long-term strategic cooperation in the energy sector constitutes a top priority.

Some media reports alleged that the convening of the five-country energy ministers' meeting marked the establishment of the oil consuming countries' group. The reports go so far as to regard the energy ministers' conference as a mechanism counterbalancing OPEC.

The allegation seems unfounded.

Each of the five oil-consuming countries maintains good relations with OPEC and multiple channels of dialogue and cooperation have been introduced between the oil consumers and suppliers, which facilitates multilateral energy cooperation and is conducive to maintaining global energy security.

The author is an economist with the State Information Center.

(China Daily February 1, 2007)

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