IEA Ups China’s Oil Product Demand Growth Forecast to 6.8%
By David Harman
13 Apr 2007 at 09:30 AM GMT-04:00
resourceinvestor.com
SHANGHAI (Interfax-China) -- The Paris-based International Energy Agency (IEA) has raised its forecast for oil product demand growth in China for this year to 6.8%, up from the 6.1% growth it had previously estimated, state media reported.
The updated figure, representing demand of 7.64 million barrels a day, was made due to the strong domestic demand for oil products seen in January and February.
According to the monthly report released by the IEA yesterday, demand during this period was driven by soaring transport fuel usage as millions of people travelled to their hometowns for the week-long Lunar New Year, the Chinese equivalent to the Christmas holiday period, China Oil News reported.
Transport fuels account for more than half of China's oil product use.
Demand for transport fuels rose by a sharp 10% year on year in February, compared to the 1.5% increase seen for other products, according to IEA.
Specifically, gasoline demand increased by 14.5% in February, jet fuel and kerosene increased by 26.1% and diesel was up 17.8%.
The continued high consumption of transport fuels in China is propped up by artificially low diesel and gasoline prices, maintained by the government in order to sustain social stability and to support the booming auto industry that has been helped along by the increasing number of people able to afford private cars, the agency said.
The report also noted that while the government has announced it will implement the long-touted fuel tax this year, it remains to be seen whether the new policy will be put into place. Low-income earners such as farmers and taxi drivers are expected to be hit the hardest by the introduction of a fuel tax as it would result in a sharp erosion of their profits.
However, further postponement of the fuel tax will encourage the sale of large cars, countering Beijing's pledge to increase energy efficiency, the agency said.
Shanghai fuel oil futures picked up 3% at RMB 3,498 ($453) on Friday as international crude oil prices rebounded sharply overnight following a clutch of refinery troubles.
The IEA said OPEC had reduced their supplies last month to cut world stockpiles, which also supported prices.
On the technical front, crude oil prices could reclaim ground lost in last week's market correction. The Shanghai fuel oil futures have been encouraged by upbeat crude prices, however, domestic spot fuel oil prices are still at high levels and consumption has been reduced to some extent, analyst Wang Liangliang from North Futures said.
Commentary
The IEA report is hardly a forecast; it is merely a reflection of existing demand status.
As for fuel tax policy observations; farmers and the like will be compensated through separate subsidies as previously announced. Any tax policy will likely be structured so as not to unduly undermine lower income bracket.
The new emissions tax introduced earlier this year, coupled with sales tax reduction on low emission vehicles does go some way to address some of the problems resulting from private automobile boom, but this is more an environmental measure.
Adoption of a vehicle tax/license system based on engine size and usage would be far more effective.
© Interfax-China 2007.
This article comes from Interfax China Commodities Daily, a daily digest produced by Interfax News Agency in Mainland China. To receive 10 free copies of this, please e-mail david.harman@interfax-news.com. |
