Review on the petroleum market in China: history, challenges and prospects
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REVIEW
Review on the petroleum market in China: history, challenges and prospects Si‑Yuan Chen1,2 · Qi Zhang1,2 · Benjamin Mclellan3 · Tian‑Tian Zhang1,2 Received: 5 February 2020 © The Author(s) 2020
Abstract The petroleum industry plays an essential role in driving China’s economic development. In the past few decades, several reforms in the petroleum industry have been implemented; however, there are still some issues that have not been resolved. Moreover, with the new-normal economy, the transition to green energy and international trade disputes, the petroleum market is also facing emerging challenges. Therefore, the purpose of the present study is to review the historical development of China’s petroleum market, identify the current challenges and propose corresponding countermeasures for future prospects. As a conclusion, five main challenges are highlighted totally, namely lack of marketization, excess oil refining capacity, high external dependency, environment pollution and unstable international trading relationship. To address these challenges, it is encouraged to deepen petroleum market reform, accelerate the elimination of inefficient refining capacity, diversify oil supply sources, as well as improve domestic petroleum enterprises’ ability to resist price risks. Keywords China’s petroleum market · Petroleum products · Market reform
1 Introduction Since the 1990s, the growth of Chinese oil consumption has accelerated dramatically due to the rapid growth of the domestic economy (Leung 2010). A stable supply of petroleum resources is currently essential to improve China’s socio-economic development, as petroleum products are almost used in every sector (Tang et al. 2011). By the end of 2018, China’s oil consumption was up to 877.0 million tonnes of standard coal and growing at a rate of 4.0% p.a., accounting for 18.9% of total primary energy consumption, second only to coal, as shown in Fig. 1. Moreover, petroleum products consumption reached 356.9 million tonnes in 2017, as shown in Fig. 2. The Chinese petroleum industry is Edited by Xiu-Qiu Peng * Qi Zhang [email protected] 1
School of Economics and Management, China University of Petroleum-Beijing, Beijing 102249, China
2
Academy of Chinese Energy Strategy, China University of Petroleum-Beijing, Beijing 102249, China
3
Graduate School of Energy Science, Kyoto University, Kyoto, Japan
predicted to grow steadily in the coming decades, continuing to account for a stable share of around 20% of the total primary energy mix (Yang et al. 2016). However, a number of factors are impeding the further development of China’s petroleum industry. For example, most of the petroleum market is controlled by the three major state-owned oil companies, resulting in a lack of competitiveness and flexibility in the market. Moreover, regulated prices of petroleum products cannot accurately reflect their intrinsic value, causing an imbalance between oil supply and demand. In order to further release the domestic petroleum market, the Chinese gover
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