SHANGHAI (Interfax-China) -- Oil will peak at $90 per barrel by March of next year, CNOOC Dep. Chief Economist Zhang Weiping said at conference discussing China's energy needs in Beijing on Monday. Zhang also expected global oil production to peak at 94-100 mb/day during the next five years.
"High oil prices will have adverse affects on China's economy," said Zhang.
China's expenditure on oil imports could reach or even exceed $60 billion on oil imports this year, up from $40 billion in 2004, putting "high pressure" on China, said Xia Yishan, Senior Research Fellow at the China Institute of International Studies.
China's annual crude demand is expected to rise by 9.7% this year, suggesting that the country will need to import 135 million tonnes this year, accounting for 42.45% of total demand and exceeding last year's figure of 40.5%, said a recent report by the Development Research Center under the State Council.
The country's net oil imports stood at 120 million tonnes in 2004.
China is facing oil shortages on the eastern coast, especially in Guangdong province. Crude processing for export purposes has already been suspended until December 31, as part of the efforts to guarantee domestic supply.
Growth of energy demand in China has outstripped GDP growth since 2003 and will face sustained energy shortages if this continues, said Zhou Dadi, Director General of the Energy Research Institute at the conference.
Energy has been put under pressure from both rapidly increasing demand and dismally low efficiency.
For each unit of GDP, China uses three times more energy than the United States and five times more than Germany and Japan. This is due to a lack of economies of scale, an over reliance on high-energy industry and outdated production technology, according to Dr. Bernhard Hartmann, a Vice President at AT Kearney.
Comparing industrial processes, energy consumption per unit of output is between 20% to 100% more than similar practices in other countries, according to David Dollar, the World Bank's Country Director for China.
Industrial production is much more energy intensive than service industries and 52% of China's GDP comes from industry, compared to an average of 36% for other middle-income countries, according to the World Bank.
Residential heating requires 50-100% more energy than OECD countries due energy efficiency standards, according to the World Bank.
Over the next 15 years, an estimated 300 -350 million people are going to move to cities. Urban residents consume 3.5 times more energy than rural residents, said Zhao Jie, from the China Academy of Urban Planning and Design.
"High oil prices are prompting us to develop new energy conservation measures," said Xia. Saving one tonne of oil is only 1/5 the cost of producing one tonne of oil.
China has already committed to increase renewable energy consumption to 10% of the nation's total energy consumption by 2020.
China has already set the price of wind power at 40-60% above the price of other energy sources to encourage development, however, renewable energy is still in the initial stage and the technology is still "weak" said Zhou.
Wind energy in Germany is still backed up by coal. For every one megawatt of wind capacity, German power companies will install 0.6 megawatts of coal generation as a backup source, said Hartmann.
"Renewable energy can't rely on preferential treatment and higher prices for development. If the technology is not strong, large scale deployment is impossible," said Zhou.
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