China’s oil and gas use fell in 2022 for the first time in decades due to COVID-19 lockdowns that curbed energy demand, a sign of a weakening economy, writes Clifford Krauss in The New York Times (NYT).
The International Energy Agency, which made the revelation on Friday, said that China’s economy was severely hampered by stringent measures to curb the spread of Covid-19. China’s demand for natural gas declined by 0.7 per cent in 2022, the first drop since 1982, the agency reported.
Imports of liquefied natural gas fell by 21 per cent, dropping China to second place among importers, behind Japan. The United States is a major exporter of gas to China, but over the past year it shifted much of its Asian business to Europe, reported NYT.
The agency’s Executive Director, Fatih Birol said that China’s reduced energy needs, combined with the unseasonably warm winter, mean that Europe “seems to be off the hook this winter,” in an interview.
Last year, the reduction in Chinese energy use kept world prices from soaring even higher after Russia’s invasion of Ukraine, giving relief to Europe and the United States as they struggled to manage cuts in energy imports from Russia, reported NYT.
However, Birol said that “next winter could be more challenging” since the weather could be colder, Russian fuel exports would be further reduced by Western sanctions over the war, and China’s economy would be recovering.
The decline in Chinese consumption last year was relatively modest overall, but it was still important since China in recent years had been the world’s leading importer of oil and gas, and most energy experts said that should remain the case for at least a few years.
China’s oil demand for the year fell by 3 per cent, or 390,000 barrels a day, the first decline since 1990, while total world demand increased by 2.2 million barrels a day, or roughly 2 per cent, the energy agency said.
The difference can be explained by much of the world’s recovery from the Covid-19 pandemic while the Chinese government kept many of its cities under lockdown, said Krauss.
Birol said the strength of China’s rebound from its Covid-19 lockdowns this year would be a key determinant of global demand and prices.
There remains a high degree of uncertainty because a recession in the United States and Europe could reduce demand, said Krauss.
“China is the key uncertainty when it comes to 2023 global energy markets,” Birol said, adding that “how the country’s economy will perform will have massive implications for global energy markets.”
According to China’s National Bureau of Statistics (NBS), the annual GDP growth of the country fell to 3 per cent, much below the 5.5 per cent official target in 2022 and its economic slowdown has the potential to generate ripple effects across the world, reported Financial Post.