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China Explores Easing Dependence on Oil Imports - 2004-09-27

China, the world's second-largest consumer of oil after the United States, is ever more hungry for energy. Its economic boom is the driving force, as more of China's 1.3 billion people buy cars and home appliances for the first time. China's leaders, concerned by growing dependence on imported oil, are looking at ways to switch to alternative sources of energy.

In the past decade, China has gone from being a net exporter of oil to a major importer. The government says oil imports have jumped by 37-percent in the past 12 months alone. This surge is happening despite a global rise in oil prices.

People here, like everywhere else, are paying more to fuel their cars. But not even high prices at the pump are slowing China's automobile revolution.

At a gasoline station in Beijing, Liu Hui, a businesswoman fueling her small sedan, complains that gasoline prices have gone up by about a third in recent months. Her solution? She bought herself a second car, a smaller model that uses less fuel. "It does not make that much difference for this car how high the prices go. My other car, an American-designed Jeep Cherokee sport utility vehicle, costs twice as much to fill up," she says.

Only a decade ago, most Chinese aspired to own a simple bicycle. But economic growth means that millions of people have traded their bikes for cars. Official figures show nearly 14,000 new motor vehicles hit China's roads each day.

The need for imported oil to fuel those cars has prompted officials to seek alternative sources of energy, including gas derived from coal, hydroelectric generation, and nuclear power.

The biggest project is the massive Three Gorges Dam on the Yangtze River, designed to produce 84-billion kilowatts a year once it is completed in 2009.

China is due to bring its 10th nuclear power reactor on line next year. As many as 27 more reactors may be needed if China is to meet its goal of producing four-percent of its total electricity from nuclear power by the year 2020.

The government has set another ambitious deadline: to generate 10-percent of its energy from renewable sources such as wind power or hydroelectric plants by 2010 . The commitment draws praise from environmentalists like Yu Jie at the Greenpeace office in Beijing. "The Chinese government is thinking about renewables much more than before. I think a lot of elements are getting together to push the Chinese government to go further and faster," he says.

The government is eager to show off projects such as wind-energy farms, and officials often proudly display for journalists a new fleet of natural gas-powered buses that will go into service in Beijing before the 2008 Olympics.

But some analysts say the projects are, for now, only tokens in meeting electricity demand.

There are signs the Chinese government is taking steps to curb dependence on imported oil. Reports say officials will very soon unveil a set of fuel economy standards on new vehicles, similar to those that many other nations already have.

But more drastic action is not likely anytime soon.

Making a significant conversion to alternatives, such as renewable energy or hybrid vehicles that use a combination of petroleum-based fuels and electricity, will be neither fast nor cheap. Most alternative energy sources need massive investment to get started and more research to perfect.

Analysts say the government could, in theory, order car manufacturers to build hybrids. But they say that is unlikely at a time when Beijing is withdrawing business subsidies and shedding state-owned enterprises.

Robert Ebel is an energy analyst at the Center for Strategic and International Studies in Washington. He says consumers in China, like anywhere else, are not likely to purchase hybrid cars if they are more expensive. "You have to give the consumer an incentive. What kind of incentive would he like? Usually it is a form of price. Some kind of incentive to conserve what he does consume," he says.

China's current economic good health also could slow significant innovations. Mao Yushi is an advisor to China's energy sector. He says that given the economic boom, China has no pressing reason to switch to other fuels as long as there is oil to buy.

"China has sufficient foreign exchange to buy. For example, [if] we buy 100 million tons of oil, it may consume only less than 10 percent of the foreign exchange we earn every year. So, that is O.K. No problem," he says.

Mr. Mao says it will take time, more research, or a shortage of oil before renewable energy sources, such as wind power, become economically feasible. He notes that wind power generation in China, as in many other places, is 50 percent more expensive than conventional power.

In the meantime, China is doing what other oil importing nations are doing: trying to find new, secure sources of fuel.

Beijing is lobbying Russia to build a pipeline carrying oil from Siberia to China. And it is working with its Asian neighbors to find natural gas.

As China continues to develop, its energy policy is starting to resemble the programs of industrialized nations, including the United States and Europe, which are also struggling to ease their dependence on imported oil.