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China fuel shortage sparks alarm

China is hoarding fuel supplies as it braces for a cold winter and looks to diversify its energy means in a move that could spell price rises for key trading partner, Burma.

Burma is one of Southeast Asia’s most reliant nations on fuel imports, according to Wong Aung from the Shwe Gas Movement. He estimates that imports from Thailand, India, Singapore and Indonesia, as well as China, at times account for 90 percent of the country’s fuel usage.

But any change in tack from China, which now boasts the world’s second largest economy, is likely to have a “large impact” on Burma, Wong Aung continued, and indeed the whole region. The Financial Times said last week that “the [diesel] shortages are reverberating through the global oil market now.”

China’s largest producer of diesel, Sinopec, suspended exports on 20 November. Its subsidiary, China Petroleum and Chemical Corp, the nation’s biggest refiner, is seeking to import as much as 200,000 tons of the 80,000 tons it bought earlier this month. This comes as China’s leading gas and oil producer, PetroChina, announced on state-run CCTV that the country could be short by about nine million cubic metres of natural gas a day. Both factors are likely to inflate prices regionally.

Gas prices within China have, like many key commodities, been intentionally kept low, at around a third of the global average cost of a barrel of oil; internationally, however, it usually hovers around 60 to 80 percent. This has coincided with a push to diversify away from coal, which currently supplies 74 percent of China’s electricity.

But the move away from coal will require compensation elsewhere. Wong Aung says that China will “look to intensify its imports in the oil and gas markets” to fuel power generators for industries previously reliant on coal.

Both India and China’s rapidly growing economies are desperately seeking new supplies of energy to secure energy security, and to perpetuate their swift economic rise. Indian Prime Minister Manmohan Singh recently noted that consumption of fuel oil in India had risen more than 40 percent in the past decade.

Beijing also last week promised “forceful measures”, according to The Economist, in order to stabilise consumer prices, which had risen by 4.4 percent since October 2009. Prices of key foodstuffs, such as Chinese cabbage, have also risen by more than 60 percent.

Price rises of key commodities like oil and gas are a big concern to both China and Burma, where commodity price surges in both countries have in the past impacted on other products reliant upon energy, and sparked social unrest: the 1989 Tiananmen Square protests were partly put down to high inflation in the preceding years, whilst protests in Burma in 1988 and 2007 were also spurred by rapid price rises.

Whilst inflation in China is nowhere near Burma’s estimated 24 percent, according to the Asian Development Bank (ADB), fears in the security of vast Chinese bank deposits as a result of inflation could prompt withdrawals, which would have an inflationary impact on the economy.

As a result, the Chinese state is keen to do all it can to keep prices stable by preventing civilians and speculators hoarding at all levels. The question is whether the impacts of Chinese fears will challenge regional economies that are increasingly tapping into China, with Burma’s exports to its northern giant worth some $US623,459,000 in September this year, up 39.5 percent from the previous month.


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