Industry group: China oil use soars in 1H despite high world prices

BEIJING, July 24 (Xinhua) -- Soaring world prices don't seem to have
crimped China's oil use, with statistics released on Thursday by an industry
group indicating that first-half consumption of oil and refined oil products set
records.

The China Petroleum and Chemical Industry Association (CPCIA) said that
"apparent consumption" of refined products -- gasoline, diesel and kerosene --
rose 14.6 percent year-on-year to 106 million tonnes, while crude oil use rose
6.3 percent to 183.3 million tonnes.

"Apparent consumption" represents the sum of net imports and output,
according to the group, and can be used as a proxy for real consumption
excluding inventory.

Apparent consumption of gasoline rose 16.2 percent, that of diesel 14.7
percent and kerosene, 6.66 percent, according to the CPCIA.

The expanding economy, booming auto demand and reconstruction after the
severe winter weather in southern China and the May 12 earthquake were the major
causes of growing consumption in the first half, said Zhu Fang, a CPCIA
researcher.

Gross domestic product expanded 10.4 percent in the first half,1.8
percentage points below a year earlier but still a rapid pace.

The association's figures indicated that state price controls have led to
unintended and even negative consequences.

For example, the state price ceilings caused an "abnormal" consumption rise
through hoarding and smuggling abroad of refined products, said Zhu.

Below-cost prices did not restrain China's demand for oil but rather
boosted it, said Niu Li, a researcher of the State Information Center, a
government think tank.

According to the China Association of Automobile Manufacturers, sales of
domestic cars increased 18.52 percent to 5.18 million units during the first six
months, a high rate by global standards with markets in Europe, Japan and the
United States hit by rising gasoline prices.

Below-cost fuel prices led to a low utilization rate at refineries and the
ensuing supply shortage in most parts of the country boosted China's imports of
refined oil products.

According to the CPCIA, net imports of oil products (gasoline, diesel and
kerosene) stood at 4.3 million tonnes in the first half, up sharply from 2.8
million tonnes a year earlier.

Gasoline imports surged more than 3,000 percent and those of diesel rose
1,143 percent. Net crude oil imports stood at 88.97 million tonnes, up 11.6
percent. The trade deficit from oil and oil products doubled from a year earlier
to 68.35 billion U.S. dollars.

To reverse the trend, China raised benchmark gasoline and diesel oil retail
prices by 1,000 yuan (146.6 U.S. dollars) per tonne on June 20, with the price
of aviation kerosene up 1,500 yuan per tonne.

The price rise, although insufficient by international standards, has
restrained demand and thus relieved the country's supply problems, to some
extent, said Zhu.