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From oil price hike to energy savings and emissions reduction
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13:43, November 15, 2007

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Many price experts were truly surprised by recent record high oil prices. Even after the price of future oil for December's contracts rose to $98.61 per barrel on the New York Mercantile Exchange on November 7th, there does not appear to be a slowing trend.

As a large developing country, China has to face the issue of an oil price hike directly. Since 2000, China has been importing 100 million tons of oil annually. Last year, China imported a total of 120 million tons of oil from the world oil market. Experts predict that China will import more than 130 million tons this year. If this trend continues, by 2010, 50% of China's oil will be imported. This will not only lead to higher foreign exchange expenditure, but more importantly, to an oil price hike. This will, in turn, affect industrial and agricultural production, the lives of the residents and macroeconomic operation. As a result, we must spare no efforts to guarantee a stable livelihood for the Chinese people and stable prices; and, to promote the steady and healthy development of the national economy.

The second reason why China cannot avoid this issue is that China currently has little say in oil pricing. For a time now, oil prices have been determined on the New York Mercantile Exchange, London Commodity Exchange and Singapore Mercantile Exchange. These three exchanges have relevant say among the ranks. As for trade methods, future oil pricing is the major force behind the main channel. China does not have any say in either trade methods or future oil pricing. Currently, China's oil and refined oil prices are still determined by a price mechanism based on domestic prices and those of the above three exchanges.

According to the trend, international oil pricing power has been controlled by the US-led OECD. After three wars in the Middle East, oil-producing countries are well aware that oil pricing rights play a role in oil transactions; and therefore, established the OPEC led by Saudi Arabia and other major oil-producing countries. In recent years, Russia gained huge foreign exchange earnings from a sharp oil price hike. These benefits encouraged Russia to rejuvenate the nation. Among emerging oil-producing countries, Russia has a stronger say in oil pricing. Brazil discovered 80 million barrels of oil reserves a few days ago, and suddenly entered the ranks of major oil-producing countries. Undoubtedly, the country will have more say in oil pricing.

On the whole, both big oil consumers and big oil-producers have a certain say in oil pricing. As a big oil consumer, China needs countermeasures. Experts have suggested that we should establish our own strategic oil reserve and commercial oil reserve system; and garner our own oil and future oil exchange system. Only in this way can we gradually gain more say in oil pricing process.

Since oil pricing is an unavoidable issue, we should formulate a long-term strategy. Especially with the current tight oil supply and high oil prices, we urgently need to adopt environmentally-friendly measures with effective energy savings, higher efficiency, and a more diversified structure. In effect, this will guarantee a sound and rapid development of the national economy.

As a result, energy savings and emissions reduction becomes even more imminent and necessary. This is also an unavoidable issue.

By People's Daily Online

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