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A 10-US-dollar rise for the international crude oil price per barrel will lead to the drop of 0.1 per cent of China's GDP growth for the current year, 0.4 per cent drop for the next year and 0.5 per cent drop for the third year while inflation rate will be up 0.2 per cent for the current year, and 0.3 per cent drops respectively for the next two years, according to the National Business Daily.

Although China will slow down imports of petroleum next year, China will still face a high oil price challenge in its economic growth, forecast some officials and experts at the "2006 Seminar on Petroleum Market'' held on Monday. They believe that it should be a key to streamline oil price and bring it in line with international practice in order to cope with the challenge.

Oil price will still be in high position next year

Influenced by factors involving hurricanes, lower surplus output capacity of the Organization of the Petroleum Exporting Countries and the situation fraught with uncertainty in oil-producing countries, crude oil price in 2006 will be kept between 63.75 to 64.75 US dollars per barrel, said Chen Guobin, manager with the Futures Department of China Petroleum & Chemical Corporation. Although with slowed down growth, the oil price in 2006 will still be high in history.

The main factors leading to crude oil hike include the world's economic growth, China's economic rise and the weak US dollar, said Ha Jiming, chief economist with the China International Capital Corporation. The corporation predicts that the world's and China's economies will still maintain high growth rate in the next two years. And the anticipated US-dollar depreciation will still in existence. As a result, the oil price in 2006 will continue to run in high position. The average Brent oil price will be 55.53 US dollars per barrel in 2005 and 2006.

Ha Jiming believes that high oil price is a great challenge to that if China can keep high economic growth. He explains presuming that the international crude oil price will increase by 10 US dollars per barrel, the oil product price will be up by 5 US dollars under the influence, which will lead to the 0.1 per cent drop of China's GDP growth rate for the current year, 0.4 per cent drop for the second year and 0.5 per cent drop for the third year. In the meantime, its consumer price index inflation will up 0.2 per dent for the current year, and an increase of 0.3 per cent for the next two years. It becomes necessary for China how to eliminate the high oil price impact.

Integrating with the international oil price

Ha Jiming says that it is the most important for China to streamline its energy policy. For the moment, China's oil price is lower than the international level, which leads to irrational distribution of resources and overheated economy, it is easy to mislead monetary policy and to increaser financial risks.

Ha Jiming adds that the government should integrate its domestic oil price with that of the world and work out corresponding allowance measures, including subsidizing farmers, and changing the method of hidden subsidy to visible one.

In addition, the government should also consider the breakdown of monopoly. The price control of oil products in China makes major oil refineries in a monopoly position. The government should control the rational pricing of monopoly enterprises. Because of this, the government should also consider the breakdown of monopoly, boost competitiveness and enlarge oil-refining capacity, or even introduce foreign investment.

Shift hot spots of oil investment

China's oil enterprises should transform their investment concept, said Liao Qinjin with the Petroleum Economics & Technology Research Center.

Liao Qinjin pointed out that due to the obvious decrease of petroleum investment opportunities in the world, development and reserves relay costs are on the increase. Enterprises' investment conception has changed. Take the five international giants of Exxon Mobil Corp, Royal Dutch Shell Plc, BP PLC, Chevron Corp and Total SA for example. Their total capital growth of expenditures was 5.3 percent annually from 2000 to 2004, lagging behind the growth of international oil price. At the same time, their investment proportion increased by 10 per cent.

In comparison with them, the total capital expenditures for three biggest petroleum corporations in the country increased by 17.3 percent on average annually, higher than the increase of international oil price.

In addition, the domestic enterprises should focus on the following in the future: the increase of investment in infrastructure and enhancement of construction of new profit centers with a new generation of core assets.

Oil product management should introduce modern circulation

China's oil product market standardization should be phased into four steps, among which, various modern circulation methods should be gradually practiced in the management of oil products, said Zhou Chun, secretary general of Petroleum Branch under the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters.

He said the oil product management includes chain business, logistical distribution, e-commerce management system, commodities retail sales, and the modern management combined with the retail sales of oil products.

Zhou Chun disclosed that the "Technical Regulations on the Enterprises' Wholesale Management of Oil Products" and "Technical Regulations on the Enterprises' Storage Management of Oil Products" are in the stage of collecting comments from various sides. It is believed that the regulations will make debut soon.

He said in conclusion that relevant national departments are making researches on making the "Law on Energy Resources".