HONG KONG - A notable feature of 2004 was the volatility in oil prices - New York light sweet crude prices reached a peak of US$55.67 on October 25, ending the year up 33.6% at $43.45 per barrel. While a number of supply-side and supply-chain factors have contributed to this situation, the most significant long-term factor contributing to rising oil prices is an increase in Asian demand, most notably from China. China's unprecedented growth not only makes it a driver of a long-term increase in energy prices, but also the most vulnerable to rising oil prices.
China, which has been a net oil importer since 1993, is the world's number two oil consumer after the US and has accounted for 40% of the world's crude oil demand growth since 2000. China's proven oil reserves stand at 18 trillion barrels, and oil imports account for one-third of its crude oil consumption.
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As a result, energy security has become an area of vital importance to China's stability and security. China is stepping up efforts to secure sea lanes and transport routes that are vital for oil shipments, and diversifying beyond the volatile Middle East to find energy resources in other regions, such as Africa, the Caspian, Russia, the Americas and the East and South China Sea region.
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While Sino-Japanese trade has reached unprecedented levels in recent years, the economic progress could be unraveled by political and military confrontation, and by energy competition. China continues to have tense relations with Japan as a result of a number of issues. These issues include, but are not limited to, Chinese opposition to a Japanese permanent seat on the United Nations Security Council, former Taiwanese president Lee Teng Hui's visit to Japan at the end of 2004, and Japanese Prime Minister Junichiro Koizumi's annual visits to the Yasukuni Shrine that honors Japan's war dead, including 14 Class A war criminals.
Asia Times
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