China: Welcome Gas Guzzlers
China, the second largest petroleum consumer behind only the United States, increased its oil imports by 12% last year. China’s oil security is much more fragile than that of the U.S., which has large reserves domestically and has troops based in the Middle East.
But the latest Beijing Auto Show has sent a chilling message: the most gas-guzzling cars, or SUVs, have seen skyrocketing sales despite their tanking in the developed markets. For instance, their sales for the past year (ending in March) in the US has dropped 22%, but in the meantime it rose by 40-45% in China.
If unchecked, this warped development of the auto industry will in the next few years seriously threaten China’s energy security, environmental protection, living standards and economic development. China’s oil prices are one of the cheapest among major oil importing nations. Now the Chinese government is trying to curb oil price increases, apparently to help the public deal with inflation. But the biggest beneficiaries from this are the rich who can afford luxurious cars or SUVs. Which is to say, the wealthy are using government subsidies on oil and infrastructure to enjoy their lives while polluting the environment. In the end, the cost of solving the energy, environment and infrastructure problems will be distributed to the general public.
More importantly, the SUV trend, if unchecked, will increase our oil dependence and further add pressure to oil inflation.
Not long ago, many cities issued bans on small vehicles, another indication that some local governments are tilting toward the rich. Yes, compact cars are less oil efficient, but they are still less oil-wasteful than big cars and they are more affordable and suitable for a developing country like China. Restricting small cars will not only damage China’s energy strategy and urban environment but also strangle the development of China’s domestic automakers.