Snow­falls may re­duce oil de­mand

The Weekend Australian - Travel - - Resources -

CHINA’S worst snow­storms in 50 years will re­duce oil de­mand in the world’s sec­ond-largest crude con­sum­ing na­tion as snow keeps cars off high­ways and fuel from reach­ing power plants, Lehman Brothers Hold­ings says.

The in­vest­ment bank has re­duced its fore­cast for growth in Chi­nese oil de­mand for 2008 to 340,000 bar­rels a day from 400,000 bar­rels a day.

‘‘ With move­ment of both goods and peo­ple re­stricted by air, land and road bot­tle­necks across the coun­try for a month or more, de­mand for petrol, diesel and jet fuel for trans­port could drop,’’ say an­a­lysts led by Ed­ward Morse, chief en­ergy econ­o­mist. ‘‘ In­dus­tries un­able to source raw ma­te­ri­als or power ow­ing to coal, diesel and power short­ages may also cur­tail de­mand for oil.’’

Lower de­mand in China may con­trib­ute to a de­cline in global oil prices as an eco­nomic slow­down in the US, the big­gest en­ergy user, damp­ens con­sump­tion. Crude fell in New York as much as 65 cents, or 0.7 per cent to $92.94 a bar­rel.

The snow­storms caused about 80 bil­lion yuan ($11 bil­lion) worth of losses, top­pled 300,000 homes and dam­aged 90 mil­lion hectares of crops in 19 prov­inces and re­gions, ac­cord­ing to the Xin­hua news agency, which cited the Red Cross So­ci­ety of China.

Road trans­port vol­umes dropped 20 per cent in Jan­uary and Fe­bru­ary, ac­cord­ing to the Lehman re­port. Snow blocked the trans­port of coal to power plants, shut­ting 7 per cent of China’s ca­pac­ity.

The last time China faced wide­spread elec­tric­ity short­ages, con­sumers turned to oil- fired gen­er­a­tors, an op­tion the coun­try doesn’t have this time, Lehman says.

‘‘ Un­like the power short­age of 2004, trans­port bot­tle­necks and de­pleted stocks from diesel short­ages ex­pe­ri­enced just 3 months ago are lim­it­ing oil-fired power gen­er­a­tion gains to just 25,000 bar­rels a day,’’ the re­port says. Lehman Brothers cut their fore­casts for petrol and diesel de­mand by 275,000 bar­rels a day in the first quar­ter. Over the whole year, de­mand will be 35,000 bar­rels a day less for both prod­ucts, it pre­dicts.

Storms re­duced rail trans­port in China by 10 per cent this year. The dis­tance mo­torists drove is es­ti­mated to be down by 25 per cent, Lehman says. Air travel was also af­fected, with 3250 flights can­celled and 5550 de­layed, the bank says.

China South­ern Air­lines Co., the na­tion’s largest car­rier, said ear­lier this month that the snow­storms would cost it at least 100 mil­lion yuan ($14 mil­lion). Bloomberg

Pic­ture: Reuters

All hands: Sol­diers clear snow. Mil­lions of Chi­nese were stranded by snow that blan­keted parts of cen­tral and south­ern China

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