China’s Oil Security Problems and Solutions

Topics: Peak oil, Petroleum, Oil reserves Pages: 8 (2623 words) Published: January 19, 2012
China’s Oil Security Problems and Solutions

——based on Oil Global Supply and Demand (Sep 3, 2011)from Professor Albert Kwong

Ma Xiao

Oil is the most indispensable and important strategic energy in international society nowadays. During the past two decades, the problem of oil supply and demand has widely drawn the attention from all over the world. China, turning from oil self-sufficiency to the world's second largest oil consuming countries, is now faced with a huge demand gap. Oil security problems are too serious to be ignored. This essay analyzes the world oil situation and China's oil system, aiming at providing effective recommendations and solutions to those security issues.

Key words:
Oil demand, oil supply, oil security, solutions

1. Introduction
In the afternoon of September 3rd, 2011, Professor Albert Kwong, the Vice Chairman and Chief Operating Officer of Petro Asian Energy Holdings Limited, gave us a lecture on the world’s oil supply and demand. Professor’s wonderful presentation and deep analysis not only packed me with general but clear understanding of the world’s oil situation, but also raised my interest. As a Chinese who always cares about the development of his motherland, I was really eager to get to know what important role oil has been playing in China’s political and economical development, what oil supply and demand situation China is faced with, what problems exist in China’s present oil security system and how to solve those issues. With the desire in mind, I read a lot of relevant papers and searched for the latest information online. What follows is a summary of what I learnt and my reform proposals to China’s oil security system.

2. The status quo and development trend of world oil
2.1 Situation of world oil supply
The world’s oil has a rich source and a great development potential, which can ensure long-term stable supply. Currently there is a reserve of 1.15 trillion barrels of oil. Based on current production rate, oil supply can last for about 41years. From global perspective, oil production growth is higher than oil demand growth, which the former is 3.8% and the latter is 2.1%. Although in the past five years, the world’s proven oil reserve has maintained an upward trend, wars and conflicts about oil became more serious than before because it is quite clear that the distribution of world oil is extremely uneven. According to statistics, 38% of the world oil reserve is distributed in the Middle East; 17.3% and 16.5% is located in the former Soviet Union and North America respectively; and Europe’s reserve is less than 4%. During the nest 20years, growth in oil supply will mainly depend on Middle East, Central Asia, South America, North Africa and other four regions. Among them, Middle East holds 121.26billion tons of oil in reserve, accounting for 69.3% of total world oil reserve, which means the dependence of world oil supply on Middle East supplies, will be further deepened in the near future. 3.2 Situation of world oil demand

During the 20years from 1985 to 2004, the average annual growth rate of world oil demand was about 1.7%. In 2004, fast pace of world economic development brought the rate to 4%. Among the total growth of oil consumption, the European oil consumption experienced a slow downward trend with the North American oil consumption a slow upward trend; Asia-pacific regions, on the contrary, experienced a surge in oil consumption, which accounted for 66% of the total growth. According to International Energy Agency’s prediction, world oil consumption will grow at a speed of 1.98% in the next 20 years, which is higher than the average level of last 20 years. By 2020, world oil consumption will reach 5.183 billion tons.

Based on the above analysis of world oil supply and demand, potential capacity of world oil supply has been rising. The so-called “oil depletion” is actually a concern of certain groups of people about the...
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