http://www.pinr.com , A notable feature of 2004 was its volatility in oil prices — New York light sweet crude prices reached a peak of $55.67 on October 25 ending the year up 33.6 percent 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 U.S. and has accounted for 40 percent 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. China has initiated numerous policies to cope with its increasing energy needs, including stepping up exploration activities within its own borders, diversifying beyond oil to access other energy resources such as nuclear power, coal, natural gas and renewable energy resources, promoting energy conservation and encouraging investment into energy-friendly technologies such as hydrogen-powered fuel cells and coal gasification. China has also joined the United States and Japan in developing strategic petroleum reserves, with the creation of 75 days of emergency reserves in four locations in Zhejiang, Shandong and Liaoning provinces.
Nevertheless, in the presence of sporadic power shortages, growing car ownership and air travel across China and the importance of energy to strategically important and growing industries such as agriculture, construction, and steel and cement manufacturing, pressure is going to mount on China to access energy resources on the world stage. 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.
However, just as China has for centuries engaged in competition for leadership of Asia, the developing world and status on the world stage, so the need for energy security has now raised the possibility of further competition and confrontation in the energy sphere. This competition has so far been limited to the economic sphere through state-owned oil and gas companies such as China Petroleum & Chemical Corporation (Sinopec), China National Petroleum Corporation (C.N.P.C.), its subsidiary PetroChina and China National Offshore Oil Corporation (C.N.O.O.C.). However, as oil prices rise and China imports an increasing amount of its energy needs, the competition is likely to spill over into the political and military spheres. There are already indications of this.
China's quest for energy resources on the world stage is creating a destabilizing effect on international and regional security. Fueled by the lack of a coherent multilateral approach to energy security in Asia and by China's already tense relations with neighboring states, the competition for energy resources may prove to be the spark for regional and international conflict. In many cases, China is vying for energy resources in some of the most unstable parts of the world. Its involvement in regions with raging conflicts could potentially draw it into the disputes, escalating a regional conflict into an international conflict.
