Sri Lanka encountered oil crisis, China’s oil dependence on foreign high, to walk on multiple legs

2022-05-22 0 By

Recently, the South Asian island of Sri Lanka has a serious oil crisis, many local people can not afford to gas.This is undoubtedly a wake-up call for China, which relies more than 70 percent of its crude oil on foreign countries. Energy security must not be dictated by others.The south Asian island nation of Sri Lanka recently suffered a severe shortage of gasoline, simply because the country is short of foreign currency and can no longer buy crude oil on the international market.Sri Lanka’s chronically loss-making state-owned Ceylon Oil corp. continues to bleed so heavily that it can no longer source fuel supplies from abroad, energy Minister Kamampila said Tuesday.”Earlier, we were short of dollars to import oil.Now we don’t have rupees to buy dollars.”At the national level, Sri Lanka is short of foreign exchange funds, such as dollars and euros, to buy crude oil. At the corporate level, the state-owned Ceylon Oil Corporation is cash-strapped and cannot buy foreign exchange resources.The shortage of gasoline supplies has affected social stability and economic development in the country, which has suffered nationwide power cuts.Sri Lanka is located in the south of India, is a population of only more than 20 million island, the number of domestic motor vehicles is only more than 8 million, including motorcycles, cars, buses, transport vehicles and so on.The number of motor vehicles in the country is very small, only slightly more than in our capital, Beijing, which reached 6.84 million in 2021.But even so, Sri Lanka still has a serious petrol shortage crisis, and the reason is that there is no money.So why is there no money?There are two main reasons. First, Sri Lanka has a single industrial structure and only relies on international tourism and export of primary products such as tea to earn foreign exchange. However, after the outbreak of the epidemic in the past two years, Sri Lanka’s tourism income has sharply decreased, so that it has no money to import oil.Second, Sri Lanka has too much foreign debt, which accounted for 104% of GDP in 2021. That is to say, the country has to use any foreign exchange income to pay off debts.The long-term deficit has placed a severe strain on the country’s finances.Last November, running out of money to pay its debt, Sri Lanka decided to offset its $250m oil debt to Iran with tea.Oil security must firmly handle the oil crisis in Sri Lanka, which reminds the Chinese people that the supply of oil is related to the long-term stability of the country and the well-being of people’s livelihood, so there must be no problems.At present, China’s crude oil dependence is over 70 percent, which means that for every 100 liters of gasoline used by Chinese, 70 liters are imported from abroad.So if there are problems in oil-producing countries that affect oil exports to China, China will suffer.In 2020, China’s crude oil imports reached 540 million tons, worth 120 million yuan, customs data showed.In 2020, the top 10 sources of China’s crude oil imports were Saudi Arabia, Russia, Iraq, Brazil, Angola, Oman, THE United Arab Emirates, Kuwait, the United States and Norway.Among them, crude oil imports from Saudi Arabia are about 84.92 million tons, or about 1.69 million b/d, while Russia will export about 83.57 million tons, or about 1.67 million b/d, to China in 2020.In the case of China’s crude oil imports, it does not put all its eggs in one basket. Instead, it has multiple legs, with imports coming from countries all over the Middle East, Africa, Europe and the Americas.China even buys a lot of crude oil from its rival, the United States.That’s the right idea.China’s large population, shortage of crude oil, but does not appear the same oil crisis to Sri Lanka, the main oil has three aspects: first, the industrial chain of China, many can export industry, foreign trade surplus for a long time, the total amount more than $3.2 trillion in foreign exchange reserves, so don’t worry about no money to buy oil;Second, China actively expands its relationship with Russia, Saudi Arabia, Iraq and other big oil producers. They have priority in obtaining their crude oil production capacity, and they are willing to build good relations with China, a VIP customer, so China’s crude oil import supply is very stable.Third, China pays attention to preparing for a rainy day and has established a sound oil reserve system.Reuters reported in 2019 that China’s total oil reserves, including stockpiles held by the state, oil companies and commercial tanks, were about 80 days of demand.In other words, even if the imports were completely shut down, China could use its own reserves to last 80 days.The biggest concern for China right now is oil shipments.While most crude oil supplies between China and Russia are via pipelines, Russia accounts for only about 15% of China’s total crude imports.China still relies on oil tankers for most of its oil imports from other countries.At present, the Strait of Hormuz is tense, where the US and Iran often fight, and the Malacca Strait is controlled by the US military. Once sino-US relations deteriorate, the US makes trouble and disrupts China’s crude oil transportation routes, it will have very serious consequences.The US is now the world’s largest oil producer and self-sufficient in crude oil. Disrupting the Persian Gulf oil routes and blocking the Strait of Malacca may not affect the US very much, but it can choke China’s energy supply.That’s what we should be worried about.Vigorously develop new energy, is the real way out!