INTRODUCTION

This chapter will be in three parts. First it reviews the oil demand trends in Asia, it then presents a brief sketch of the various strategies of Asian Oil Importing Countries, and lastly, discusses who the seven lucky winners in the Asian scramble for oil are.

HIGH OIL PRICES

Figure 20.1 shows a graph of the historical trend of oil prices. It shows that oil prices have breached all historical highs, above levels reached during the 2003 Iraq War or the 1991 Gulf War.

Oil prices have been hovering at the US$70 level since then. As to why oil prices are so high, there are up to two dozen different reasons every day that one could cite as reasons why oil prices are currently at such historical levels.

The demand for oil has very much been linked to GDP growth. There is a strong correlation between economic growth with demand for oil. It is a cyclical pattern, and the robust GDP growth in 2004 had led to an unexpectedly strong surge in oil demand, which has reached twenty-year highs. The actual increase in demand in 2004 was 2.6 million barrels a day in additional requirements, and more than half of this incremental demand is attributed to China and other emerging Asian countries. The increase in demand continued in 2005/06, although it has slowed down a little bit.

Among the top ten oil consuming nations, there are four Asian countries: China, Japan, India, and South Korea. China is the only Asian country among the top ten oil producers, ranking sixth. In terms of imports, five out of top ten oil importers are Asian countries: Japan, China, South Korea, India, Taiwan.

CHINA

What brought the increase in oil demand? First, consumption of oil from China has increased because of their thirst for cars. Traffic congestion in China is getting worse. Vehicle sales reached 5.6 million in 2005, up 13 per cent.