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Instability in Some Oil-Producing Countries, Speculation Responsible for Soaring Oil Price

Posted on: Tuesday, 13 September 2005, 09:00 CDT

Instability in some oil-producing countries, speculation responsible for soaring oil price

BEIJING, Sept. 13 (Xinhua) -- Under-capacity of some oil- producing countries arising from continuous instability and market speculations have been the major factors for the soaring oil price, a senior Chinese government official said Tuesday.

Some people attributed the oil price hike in 2004 to the growth of oil consumption in emerging countries such as China and India, "but this view does not correctly reflect the situation of the international energy market," said Zhang Guobao, deputy director of the State Development and Reform Commission.

"It's clear to everyone that although the oil price is rising amid fluctuations, no one has experienced supply interruption, supply shortage or unavailability of sale," the official said at a press conference of the Information Office of the State Council.

"That means crude oil supply and demand are balanced globally," he said.

Multiple factors have contributed to the price hike, such as the continuous turbulence and under-capacity production in some oil- producing countries, and particularly the influx of a large amount of international floating capital into the crude oil trading market, he said.

"Every slightest sign of disturbance could drive speculations on the oil price."

China's oil import accounts for 6.31 percent of the world's total, or 23 percent of that of the United States, and 56 percent of Japan.

The United States takes up 29.6 percent of the world total oil trade and Japan, 11.3 percent.

According to Zhang, China is expected to produce 180 million tons of oil in 2005 and the annual output would be maintained in the coming two decades.

As for China's energy strategy, Zhang said, the fundamental principle for energy development is to rely on domestic supply, and top priority has been given to promoting energy conservation and improving the efficiency of energy consumption.

Between 1990 and 2004, China's energy consumption for every 10,000 yuan (1,234 US dollars) of gross domestic product was lowered by 45 percent, the official said.

Source: Xinhua News Agency - CEIS

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