It's only a matter of time before crude oil is being traded above $100 a barrel, with predictions even pointing to the $150 mark. These high prices have resulted in an oil shortage in some parts of China, and much attention is now being given to finding ways to bring oil prices down in the country. Lin Boqiang, from the China Center for Energy Economics Research in Xiamen University, believes he has the answer.

Many factors will affect short-term oil prices, but it is soaring oil demand and the expectation on demand growth that have boosted the prices. This analysis is based on current global oil demand, especially the expectation for growing consumption in emerging economies like China and India. It is predicted that by 2010, Asia's oil demand will reach 20 million barrels per day, twice the current level of the United States. As oil is an unrenewable resource, a middle- and long-term oil shortage is sooner or later.

International cooperation

Nowadays, however, it is difficult to deal with the energy crisis by updating technologies due to the fast consumption of energy reserves and rising energy prices. There exists an over-optimism for energy reserves (including such renewable energy sources such as solar power and wind). It is also important to remember that estimations never take into account the costs of developing and making use of these energy reserves and also the barriers in promoting them in developing countries. We hope that before scientific advancements can offer economically affordable energy as substitutes, the oil reserves will not run out. However, soaring oil prices and temporary oil shortages will exert enormous impacts on economic and political stability in both developing and developed countries.

Given the current oil supplies and international politics, it's difficult to keep relatively low prices while meeting the high oil demand. That is to say, all the measures to cut the oil prices must be based on the efforts to weaken the expectation for an oil shortage. Mainly, efforts should be made to bring down the growth of oil demand and reduce the unpredictability in this regard. If the target of economic growth is not to be changed, the only solution is to raise the efficiency of energy use and to save energy. As conventional energy is unrenewable and there is still no reliable alternative energy, while helping developing countries to handle oil problems, developed countries are actually helping themselves too. This is the foundation for international cooperation on the oil issue.

A good starting point for cooperation is to conduct active dialogue, which will help to develop a positive attitude toward oil problems. Considering its large population and low per-capita energy consumption, as well as rapid urbanization (more than 20 million rural population will rush into the cities annually), China's energy demand will continue to rise until the year 2020 in order to maintain a year-on-year economic growth rate of 9 percent. Attacks on China's oil consumption and reluctance of cooperation in the international community will make it more difficult for the Chinese Government to solve energy and environment-related problems. Mean-while, it's wrong to think that the Chinese Government is not serious in dealing with energy and environmental problems. Due to the special characteristic of energy, it's a hard job for the government to make a decision before it is certain of reform results. For example, to raise prices of oil products will curb the demand, but policymakers have to weigh its possible impacts on the overall economy and social stability.

Include China in energy talks

It just does not work if the international community presses China to reduce oil consumption, but it instead should help China to use energy in a more efficient way and then reduce oil demand. Technically, a lot of clean energy solutions do work, but the key is how to encourage their use through tax means and subsidies.

Overseas businesses should not focus exclusively on selling clean energy solutions to China, but they should also ask themselves: Why should Chinese enterprises buy their technologies and are they affordable? The international community should offer the technologies free of charge and try to encourage Chinese enterprises to use clean energy with financial incentives. In terms of looking for new energy, it's also necessary for the international community to offer financial incentives. These are surely high-return inputs.

It's necessary for developed countries to provide more technical assistance to support energy reform in China and other developing countries. Making energy a market-oriented product and the reform of energy management mechanism can help these governments concentrate on the improvement of the systems for energy production and consumption and optimal distribution of energy resources, and the market can play a bigger role in energy investment.

The international community should include China into the energy talks as soon as possible. The International Energy Agency (IEA) is supposed to accept China as a member. China is now the country that has the fastest energy consumption growth in the world. IEA needs cooperation from China. In the coming years, newly emerging market economies like China and India will maintain a high economic growth rate and also a strong demand for energy. IEA must have a full understanding of China's energy demand, or it might misjudge the current global energy state and lack a cooperation platform for problem solving. If China is accepted into IEA, it not only puts the IAE in a stronger international position, but also allows the world body to handle emergencies in a more coordinated way.

Actually, as long as the developed countries are willing to consume less, the impacts on the international market exerted by oil consumption in developing countries will be relieved. For example, the Americans consume over 3 tons of oil per person every year but the Chinese only consume 242 kg. When estimating the amount and speed of oil demand growth in China, developed countries need to estimate their own energy demand. This is an important part of cooperation.