China's Big Oil Mistery: Car Sales "Up" Yet Low Oil Consumption

The EIA reported today that it expects oil consumption in China to grow slightly in both 2009 and 2010, by 80,000 barrels a day.

They expect China's oil demand to average 8.4M barrels a day this year and 8.7M barrels a day.

However, they cite a mistery in that car sales have gone higher yet oil consumption has not.

"Chinese apparent demand data feature some odd trends. The most glaring is the seeming mismatch between subdued gasoline demand and surging car sales,"

The mismatch is probably related to a large degree to incomplete data (lack of inventory figures and possibly missing or understated estimates from independent retailers). However, it noted other possible explanations:

- greater efficiency as consumers buy more small cars,
- tendency of Chinese drivers to use vehicles less frequently than drivers elsewhere.
- local governments and companies buying cars to support local manufacturers and then idling the vehicles in car parks.

The latter would not be surprising. The data coming from China is just unreliable, yet the media cheers any positive outlook coming from the country. GDP numbers for example are based on production, oddly indendent of wheter anyone buys the production.

"However, as compelling as these explanations may be, they remain largely anecdotal, while some appear to be contradictory," the IEA said.

"In addition, the central government has frozen expenditures for new cars and has strongly encouraged local governments to follow suit, thus casting doubts on its supposed willingness to support the local industry at all costs," the IEA said.

The agency said it was virtually impossible to assess behavioral explanations, so the mystery remains unsolved.

One really wonders about the veracity of the increased car sales reports.