China jittery as fuel prices surge

China’s fast-growing economy might appear impervious to rising oil prices but government leaders are jittery as crude surges toward the sensitive $100 mark. One sure sign of nervousness is a delay in the introduction of an anticipated tax on fuel, until oil prices recede. Another is Premier Wen Jiabao’s visit, this week, to Beijing’s poorer neighbourhoods in a publicised show of concern over rising inflation. Meanwhile, the release of the annual forecast of the International Energy Agency (IEA), which predicts that China will displace the US as both the world’s biggest polluter and the largest energy consumer by 2010 has been met with a wave of official scepticism.

The timing of the release last week, which came as international oil prices hit $96.90 a barrel, was termed “inappropriate” by Chinese officials as it seems to assign blame for rising crude prices to China and India — whose soaring demand would be driving energy consumption growth in the years to come. “The annual World Energy Outlook by IEA is merely a scientific projection, based on forecasts and scientific analysis, and it does not have any political background,” Li Junfeng, an energy official from the National Development and Reform Commission, the country’s top planning body, told the media at a press conference. “My worry is that the (IEA) report could be used by other people with very definite political motives.”

The government team led by President Hu Jintao has made equalising growth and helping poor peasants in inland provinces its top policy priority and is loath to see any social discontent arising from fuel price hikes. “The higher than targeted inflation in the first nine months of this year is the reason why domestic fuel prices were not (initially) allowed to keep pace with surging international crude oil prices,” Liu Zhenqiu, price bureau chief with the National Development and Reform Commission said.

Also on the weekend, Chinese officials said the government would delay the implementation

of a controversial fuel tax that has been in the workings for more than ten years. Chinese media reports had said earlier that the tax would be imposed in March next year. “Now

is not an appropriate time to carry out the tax policy, as the government plans to launch it only when international oil prices are low,” Chen Qingtai, research fellow with the State Council’s Development Research Centre, said at a car industry forum in Beijing.

The tax is seen as a tool for curtailing fuel consumption and worsening air

pollution in thousands smoggy cities where the numbers of vehicles have shot in recent years. Beijing, in particular, has been eager to clean up its air by reducing car emissions by next year, when it plays host to the Olympic games.

Worries about inflation and social unrest, which have prevented the government from liberalising energy prices, are working also against Beijing’s plans to increase energy efficiency. Experts say allowing the market to control energy prices would naturally encourage efficient use of oil and gas.

The country is lagging behind declared targets for making its economy more energy efficient by using 20% less fuel by 2010. Targeting a four percent reduction in energy use per unit of gross domestic product, last year, China managed a drop of just 1.3 per cent. — IPS