IEEJ: January 2011

Special Bulletin
July 8, 2010
A Japanese Perspective on the International Energy Landscape (2)China’s Presence in International Oil Markets
Ken Koyama, PhD
Director
Strategy and Industry Research Unit
Institute of Energy Economics, Japan

When international politics, the world economy and other key issues are considered, anyarguments that fail to cover China’s presence make no sense now. This is the same case with energy
and environmental problems. For example, China’s primary energy consumption in 2009 totaled
2.18 billion tons oil equivalent, almost equal to the figure for the United States that is the largest
energy consumer in the world. China’s share of global primary energy consumption was the same as
20% for the United States. China was the second largest oil consumer and importer after the UnitedStates, accounting for 10% of global oil consumption and imports. It was the largest coal consumer,capturing a dominant 47% share of global coal consumption.
Changes in China’s shares of energy consumption indicate a very rapid increase in China’s
presence. China’s share of the global market rose from 10% in 2000 to 20% in 2009 for primaryenergy consumption, from 6% to 10% for oil consumption, and from 28% to 47% for coalconsumption, demonstrating a steep expansion. Japan’s share fell from 6% to 4% for primary energy
consumption and from 7% to 5% for oil consumption, showing its declining presence in the global
energy market. The substantial enhancement in China’s presence has been backed up by the rapid
expansion of its domestic energy market. The growth of China’s domestic energy market has led toincreases in energy import, aggressive resources acquisitions and diplomacy, and consolidation of its
bargaining power at talks on energy and environmental problems.
Needless to say, high economic growth is the direct driving force for the substantial
expansion of China’s domestic energy market. Particularly from 2003 to 2007, China continued
double-digit annual growth as the “factory for the world”. In the meantime, income levels rose
gradually. Particularly in coastal regions, “wealthy people” emerged. Although the Chinese
economic growth slowed down in the wake of the 2008 Lehman Shock, its growth in 2009 cameback to 9.1% thanks to a 4 trillion yuan economic stimulus package, indicating that China now
serves as the driver of the world economy. China’s economic growth and energy demand expansion

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IEEJ: January 2011

in 2009 marked a contrast with the OECD countries’ negative economic growth and energy demand
decline, pushing up China’s presence in the world.
It has become a top priority and an urgent challenge for Middle Eastern oil producers,
Russia and other energy resources exporters to enhance access and expand sales to the growing
Chinese market. Whenever I exchanged views with experts in resource-rich countries in recent years,
I was impressed with their strong interests in China’s future. For resource-rich countries that havetraditionally given strategic priority to European and U.S. markets, however, the enhancement of
their access to China (and other emerging countries including India) may entail a kind of “aparadigm shift”. Such changes in the area of energy issues are important from the standpoint ofinternational political and economic relations, given that they may affect the balance of power
among China, resource-rich countries, Europe and the United States.
For all industrial countries including Japan, strengthening of relations with China has
become more and more important. Since Japan and China as energy consuming countries share thegoal or challenge of international energy market stability in common, Japan must develop mutual
understanding and cooperation with China in the area of promoting energy conservation, alternativeand clean energy development, oil reserve system development, etc. The International Energy
Agency has given a priority to the enhancement of cooperation with China as an indispensable
challenge for the stabilization of international energy markets. This is a typical indication thatstrengthening ties with China has gained growing importance. It has become a matter of pressing
concern for energy companies in industrial countries as well as non-industrial nations to approachthe expanding Chinese energy market and find business opportunities there.
China’s presence is significant not only for the stabilization of international energy
markets for energy security but also for international discussions on the global warming issue. In2009, China was the world’s largest carbon dioxide emitter, accounting for 24% of global emissions.
At a time when China is expected to inevitably expand carbon dioxide emissions further on its
energy demand growth, the world is questioning if China as “a responsible power” would engage inglobal warming prevention measures that would serve global interests.
Meanwhile, we should also pay attention to various problems and uncertainties with regard
to sustainability of China’s growth. They include fears of asset bubbles amid economic overheating,pressures on China to revaluate the yuan, and the future course of the yuan revaluation, growing
upward pressures on wages, urban-rural gaps, minority races and the aging population.
How will China with these domestic problems address global problems after increasing its

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presence in the international arena? How will China’s strategies, policies and actual actions copewith these problems? How will the world, including Japan, face, respond to and cooperate withChina? These questions represent inescapable challenges for the key global problems in the 21stcentury including energy and environmental problems.
Contact: report@tky.ieej.or.jp

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