New | Oil's low share of China's energy mix means full impact yet to be felt
Impact hard to quantify on the mainland due to crude's low share of energy consumption mix
The fall in oil prices has lowered manufacturing costs in oil-importing economies including the mainland, but due to oil's low share of the mainland's energy consumption mix, the impact from the decline had been smaller than expected, analysts said.
"Oil imports accounted for 57.4 per cent of China's 490 million tonnes oil consumption. Although China is also the world's fourth-largest oil producer, the country's deficit in oil trade has been expanding precipitously," Mizuho Securities Asia economist Shen Jianguang said.
With crude prices having dropped by more than 50 per cent in the past year, the mainland's oil import bill is likely to be reduced by US$110 billion this year, according to estimates by UBS.
Analysts said the lower prices would lead to higher real consumer income due to fuel savings and being secondary benefits to the economy.
However, not all the reduction in the oil import bill will translate to economic benefits or reduction of production costs due to the low share of oil in the mainland's energy use.
"Oil accounts for only 18 per cent of China's energy mix. Of which household oil consumption is only a third. In addition, domestic oil prices have fallen by only half of the global price drop, as China's oil consumption tax has also been increased," UBS analyst Tao Wang said.