Quite apart from the Chinese government’s economic stimulus package of 2009, which has been extended through 2010, Chinese oil demand will continue to grow exponentially.

The reason? That country’s astounding demographic shifts, said numerous speakers at IHS CERAWeek in Houston.
China’s daily oil demand is now about 8 million barrels, the second-highest level of oil demand in the world after the U.S. That demand has been increasing about 9% per year for several years, said IHS CERA senior director for Asia, Mark Hutchinson.

From 2005 to 2009, Chinese demand for oil rose by 1.7 million barrels a day, said IHS CERA director K.F. Yan, who lives in China.



He cited two main reasons: the fast rise in vehicles for personal use, and the fact that as “the factory to the world,” China uses more oil-derived products as a petrochemical feedstock.

“The key point is not that demand is going up, it’s by how much?”

Other speakers pointed to China’s dramatic urbanization, which causes oil demand to grow. In the past 17 years, some 156 cities have more than doubled their population. What’s more, 32 of these have seen their population increase more than six times since 1990, said Jorg Wuttke, China representative for chemical giant BASF.

BASF, Shell, BP and others have large petrochemical joint ventures in China.

From 2005 to 2009, Chinese demand for oil rose by 1.7 million barrels a day, said IHS CERA director K.F. Yan, who lives in China. Petrochemical demand for oil rose 10.9%, gasoline demand was up 9% and jet fuel demand rose 8.7%.

Government policy is playing a big role, as Beijing encourages more people to buy cars. In 2009, thanks to stimulus incentives, Chinese vehicle sales rose 45%. In 1995, there were 10 million vehicles in China, including taxis, government and private vehicles and commercial trucks. Today there are 60 million.

Some 13.6 million vehicles were sold in 2008, surpassing auto sales in the U.S. for the first time. By 2030, the total vehicle fleet will exceed 200 million vehicles, by most conservative estimates. (To compare, the current U.S. fleet is about 240 million vehicles.)

“Year-over-year sales growth is phenomenal,” said Britta Gross, director of global energy systems and infrastructure for GM. “Sales grew 23% annually from 2000 to 2009.”

This is a big concern because by 2020, China is expected to have to import 70% of its crude oil needs. Already the government is investigating biofuels, coal-to-liquids, electric vehicles and other alternatives. GM, consulting firm SAIC and Tsinghua University formed a research consortium in 2008 to come up with many alternatives fuels, batteries, plug-ins and new engine technologies, Gross said.

Beijing’s current energy policy is an odd mix of promoting more sales of cars while at the same time, beginning to manage the demand side, urging people to conserve fuel and use public transportation, Yan said.