China's True Economic Achilles' Heel? Oil Dependency

Concerns grow in Beijing, especially as the American boom in shale-gas production is helping the U.S. move toward energy independence.

A PetroChina gas station in Huaihua, Hunan
A PetroChina gas station in Huaihua, Hunan
Zhang Huanyu

BEIJING — The United States is expected to bypass Russia next year to become the world’s largest non-OPEC crude oil producing country, according to a recent report by the U.S. Energy Information Administration. Another report pointed out that the difference between daily oil consumption and production in the U.S. has shrunk to 624 barrels in September. That same figure is 630 for China, making it now the world’s biggest net crude oil importer.

China’s oil import dependency has risen from 32% at the beginning of this century to 57% last year. In the past few years, Chinese car ownership has exploded while China’s oil production has grown only slightly.

A few days ago, China’s National Energy Administration incorporated shale gas for the first time as a strategic and emerging industry. The Chinese government is expected to increase financial support to this industry by reducing fees and royalties and adding new tax breaks to shale gas mining firms.

“There’s no doubt China’s oil import dependency is increasing,” a Chinese energy expert says. “It’s only a matter of time that this will reach 60% or even higher.”

China’s per capita oil and gas reserves are inherently low, so as its economy grows, along with its per capita oil and gas consumption, a looming shortage in the resource won’t come as a surprise, the expert explains.

In contrast, America’s oil and gas production continues to grow while its per capita car ownership and car mileage have started to show a downward trend.

Worry about the self-sufficiency rate

China’s overall energy self-sufficiency rate has always hovered around 90%. But its energy structure is not balanced. In considering its huge demographic base, its per capita energy resources are far lower than the world average. As the 2012 China Energy Policy white paper showed, China’s per capita resources of coal, oil and gas are respectively 67%, 5.4% and 7.5% of the world average. At the same time, China’s current per capita energy consumption level is only one-third of that of advanced countries.

It took only 15 years for China to double its crude oil consumption, from the 200 million tons at the end of 1990s to 480 million tons last year. Meanwhile, China’s oil production has grown only modestly from 1.6 million tons to 2.1 million tons.

“As for the exploitation of shale gas, rapid development in China won’t be seen in the short term,” says Lin Boqiang, director of the China Center for Energy Economics at Xiamen University. “America’s shale gas production has grown rapidly in recent years, but it took them 10 years or even longer to first acquire the technology. It would be very hard for China to catch up in the short term.”

Increasing car ownership

According to China’s Association of Automobile Manufacturers, China sold 19.31 million cars in 2012, up from 9 million cars just four years earlier. And though China now has some 120 million vehicles, there is still huge room for growth.

Xu Qinhua, director of the Center for International Energy Strategic Research Studies of Renmin University, points out that many developed countries went through the consumption phase China is currently experiencing, such as Japan in the 1970s when people favored larger, less energy-efficient vehicles.

“The automobile manufacturing is a pillar of industry in China’s national economy,” an international energy consulting agency researcher says. “The Chinese government cannot and will not introduce overly strict regulations. And anyway, as per capita income grows and living standards improve, it’s very difficult to suppress car consumption.”

No alternative so far

Over the past few years, a variety of new energy-saving projects have appeared one after another with dizzying speed, from the Tesla electric car to photovoltaic and wind energy. Inevitably, all of these new innovations spark a frenzy of speculation in China. Most of them are short-lived. After all, it will take a long time for new energy sources to become a real alternative to conventional ones. “It will probably take 20 years or even longer for the new energy to arrive at an industrial scale,” says Xi Qinhua. As she points out, the Chinese government must still build major infrastructures to allow for fossil fuels to be replaced with new more sustainable energy solutions.

“China’s shale gas won’t be gushing out in the short term. It’s still a long way from full-scale development,” says Zhang Yuejun, director of the Energy Market & Coal Market Research Office of the Beijing Institute of Technology.

According to recent data, the U.S. accounted for 39% of the world’s shale gas production in 2012, Canada 15%, and China barely 1%.

What’s the solution?

What does China’s continuous crude oil demand mean for the country and for energy prices?

Zhang Yuejun says that China’s increasing oil imports may have long-term effects on the volatility of oil prices. But in the short term, factors such as the growing U.S. inventory, the political and economic changes in the Middle East and other factors are more influential on short-term oil price fluctuations.

For China, the task of reforming its energy market is urgent. If the Chinese government artificially restrains rising oil prices for social stability considerations it will most likely jeopardize industrial expansion and technological initiatives.

“The key is to allow market efficiency so that more private capital can enter this market and break the monopoly over property rights and prices," says Lin Boqiang.

Lin also believes that in the context of today’s energy shortage it’s difficult for China to gain advantages as a latecomer, although it can obtain new oil and gas resources through overseas mergers and acquisitions. “So the key is to diversify the origins of the crude oil. Apart from the Middle East, China should actively develop new oil and gas sources in countries such as Russia,” Lin urges.

In contrast with the endless ethnic and national conflicts in the Middle East, from which energy transport requires warship escorts, Russia is relatively stable and is China’s neighbor. Besides, Russia’s traditional export destination, Europe’s economy, is still shrinking and lacks sufficient demand. All this implies that there’s more opportunity for cooperation in energy between China and Russia.

Indeed, during his visit to China last month, Russian Prime Minister Dmitry Medvedev announced that the two countries have signed a document in which Russia agrees to export 10 million tons of crude oil to China annually.

Another possibility, as Xu Qinhua points out, is if China and the countries of Southeast Asia work together to exploit offshore oil and gas resources. That, no doubt, will require the best diplomatic skills from all.

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How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.

But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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