By BHUSHAN BAHREE Staff Reporter of THE WALL STREET JOURNAL
PARIS -- China's fast-growing economy has reached such heft that the country has emerged as the largest force driving the world's growing demand for oil, the International Energy Agency said.
Faster-than-expected economic growth in the U.S. and Europe is also resulting in more oil use. But the latest data and forecasts by the Paris-based global energy watchdog show China alone accounting for about a third of the world's increase in oil use this year and in 2004, when China is expected to displace Japan as the second-largest consumer of oil after the U.S.
Increased Chinese buying makes it easier for the Organization of Petroleum Exporting Countries, the global oil-producers cartel, to maintain relatively high prices for oil and to keep the cartel cooperating. The extra Chinese demand means OPEC members have less need to restrain their output, always a contentious issue with the group, to achieve their current objective: keeping prices in a range of $22 to $28 a barrel for a basket of crudes. So far this year, the price of this basket has hovered around the top end of the band.
But the emergence of China as a huge buyer could also add to price volatility on world oil markets. That is because Chinese oil data are widely considered to be less reliable and comprehensive than numbers from mature markets such as the U.S., Western Europe and Japan, where demand patterns can be more easily tracked. Chinese data collection is expected to improve, but the IEA noted the country's vast size and complex economy as obstacles.
China doesn't belong to the IEA, whose membership comprises 26 major industrial nations in North America, Europe and the Asia-Pacific region. But the energy watchdog works closely with China, Russia and other major oil-producing and oil-consuming nations that aren't members to compile and publish data on petroleum demand and supply every month.
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