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Research on Unsustainable Embodied Oil Leakage and Its Influence Factors in China’s Export Trade

Keqiang Guo and Baosheng Zhang*

School of Business Administration, China University of Petroleum, China

*Corresponding Author:
Baosheng Zhang
School of Business Administration,
China University of Petroleum, Beijing, China
Tel: +86-010-8973-3792
E-mail: [email protected]

Received Date: January 19, 2017; Accepted Date: January 28, 2017; Published Date: February 07, 2017

Citation: Guo K, Zhang B (2017) Research on Unsustainable Embodied Oil Leakage and Its Influence Factors in China’s Export Trade. Oil Gas Res 3:131. doi: 10.4172/2472-0518.1000131

Copyright: © 2017 Guo K, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

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Abstract

Over the past few decades, China has “leaked out” massive oil resource through exporting different kinds of products, which intensified the county’s energy dilemma and obviously is unsustainable. The aim of this paper was to calculate the total and industrial amount of oil embodied in China’s export during 2002~2012 and to analyze its influence factors. An exported embodied oil model was built based on the Input Output Analysis, and the influence factors of embodied oil were decomposed into energy utilization technology, export structure and export scale on the basis of the Structure Decomposition Analysis. The results indicated that the direct and the complete oil consumption efficiency in 2012 are lower than that in 2002. The total exported embodied oil grows from 0.58 × 108 tons in 2002 to 1.11 × 104 tons in 2012, which accounts for a large percentage of the domestic oil consumption. The enlargement of export scale is the main positive promotion for embodied energy increase in exports during 2002~2007 and 2007~2012, and the energy utilization technology is the key factor for the part of negative influence in embodied energy decrease. Though the export structure factor doesn’t play a key role in embodied energy change in exports, comparing with the other two factors, it has substantial potential for decreasing the exported embodied oil. Finally, policy suggestions were proposed based on the results to improve the situation.

Keywords

Embodied oil flow; Export trade; Input-output; Structure decomposition analysis; China

Introduction

After the accession to the World Trade Organization (WTO), China’s integration with the global economy has contributed to sustained growth in international trade. Both its exports and imports have grown faster during the past dozen years, while China’s trade surplus increased dramatically. Although this trend was affected by the global financial crisis and the international political volatility, the Chinese government has made some plans recently to promote the economic prosperity, including “Silk Road Economic Belt and the 21st-Century Maritime Silk Road” [1] and “Made in China 2025” [2], and so forth. Under these background, China’s export trade will keep on developing predictably. On one hand, the huge trade surplus has brought China a great amount of foreign exchange reserve; on the other hand, it also cost China significant volumes of energy [3], because all goods and services produced in an economy are directly and/or indirectly associated with oil use [4].

The debate on the impacts of international trade on energy flow is not new. Many researchers have studied the embodied energy/carbon imports or exports for a number of countries and regions, such as Brazil [4], China [5], the United Kingdom [6], and the United States [7], and so on. These studies show that there are a lot of energy flow embodied in the international trade, which is not often considered and still not sufficiently clear. In China’s energy supply system, oil highly dependent on import, and the gap between its consumption and production has been increasing quickly. At the same time, with the continued growth of international trade, China are “leaking” a large number of oil through exporting different kinds of products, which is unsustainable. It is significant and urgent to answer the questions including, but are not limited to: How many embodied oil are exported? Which export industrial sectors are most oil-consuming? What is the major driving force factors of the increase for the embodied oil export? The aims of this paper focus on calculating the amount and the pathway of oil flow embodied in China’s export trade by using the Input Output Model and the Structure Decomposition Analysis. The study hopefully offers consultations for a sustainable development and management of China’s international trade.

Methodology and Data

Basic input output model

The Input-Output Analysis was firstly developed by Leontief in the 1930s, which has been widely used for analyzing the economic relationship of linkages between different sectors. The basic Input- Output Model can be expressed as equation (1):

Where, X and Y represent exogenous and endogenous accounts respectively, I is identity matrix, and A is the technical coefficient matrix that can be expressed as equation (2):

Where I = (1,n); j= (1,n); n is the count of sectors in an economy system; aij is the technical coefficient, also called as direct consumption coefficient, which can be expressed as equation (3):

Where, xij is marked as sector j’s use of products from sector i; and xj is marked as the total output of sector j. The matrix (I – A)-1 is often called Leontief Inverse Matrix. Another important conception in the basic Input Output Model is complete consumption coefficient, denoted by bij, which measures how much direct and indirect output from sector i will be used in sector j’s one unit worth of value of final output. It can be expressed as equation (4):

Where, k means the middle sector. If the complete consumption coefficient matrix is set as B, i.e. B= (bij)n×n , the equation (4) can be solved and transferred to equation (5):

Exported embodied oil model

Based on the basic Input Output Model, the model for calculating oil flow embodied in international trade can be established as equation (6):

Where, EO is the amount of embodied oil in international trade; eoi is the amount of embodied oil in one unit worth of value of product i, i.e. embodied oil intensity; Vi is the total value of product i, in import or export trade. Before calculation the technical coefficient matrix A should be modified to eliminate the influence of the processing and manufacturing trade, for example, some products are made by imported semi-finished products and be exported again after assembled. Firstly, A can be distinguished to two parts: the imported middle products part Am and the domestic middle products part Ad, i.e., A = Am + Ad. Secondly, the import coefficient matrix M is set to establish equation (7):

Where, M is a diagonal matrix that can measures the dependence of sector i on the imported middle products, and the element of the diagonal matrix, marked as mii, can be expressed as equation (8):

Where, Xi is the total output value of sector i, imi is the total import value of sector i and exi is the total export value of sector i. It is assumed in this analysis that the share of imported products in every sector are same. Finally, the model of calculating exported oil flow embodied in international trade can be expressed as equation (9):

Structure decomposition analysis

Based on the exported embodied oil model, the Structure Decomposition Analysis can be continued: firstly, set gi = eoi ( I − Ad)−1 , which is complete oil consumption of sector i; secondly, set si = exi / EX, where exi is the total export value of sector i as mentioned above, EX is the total export value of the country, and, so, si is the share of sector i’s export value on the total export of the country. Then, the exported embodied oil of sector i can be transferred to equation (10):

The amount of exported embodied oil are divided by this equation into three parts: the complete oil consumption coefficient, the structure of export and the scale of export, which are called the technology effect, the structure effect and the scale effect. The change of the exported embodied oil from time t1 to time t1 can be expressed as equation (11):

Equation (11) can be solved by using the Logarithmic Mean Divisia Index (LMDI) method. The solution are shown as equation (12):

Where, represent the influence effects of the export embodied oil changes caused by technology, the structure of export and the scale of export.

Data

The oil consumption, the total output value of every industry, the technical coefficient matrix A between all industries and the import/ export value of every industry are needed to calculate the embodied oil flow. All of the data above are available from China’s statistical yearbooks and China’s Input Output tables that both released by the National Bureau of Statistics of China [8]. Classification of industries are different between the two data sources, so it should be modified for consistency. Twenty-eight industry sectors are used in this study, as shown in Table 1. It is worth noting that production values in different years are not directly comparable because of the fluctuations in prices. To solve this problem, all values in every year are converted based on 2002’s industrial constant prices.


NO.
Industry Sectors
S1 Agriculture, Forestry, Animal Husbandry, Fishery
S2 Mining and Washing of Coal
S3 Extraction of Petroleum and Natural Gas
S4 Mining and Processing of Metal Ores
S5 Mining and Processing of Non-Metal Ores, other Mining and Quarrying
S6 Manufacture of food, beverages and tobacco
S7 Manufacture of Textile
S8 Manufacture of Apparel, Leather, Fur, Feather and Related Products
S9 Processing of Wood and Manufacture of Furniture
S10 Manufacture of Paper, Printing, Manufacture of Articles
S11 Processing of Petroleum, Coking and Processing of Nuclear Fuel
S12 Manufacture of Raw Chemical Materials and Chemical Products
S13 Manufacture of Non-metallic Mineral Products
S14 Smelting and Pressing of Metals
S15 Manufacture of Metal Products
S16 Manufacture of General and Special Purpose Machinery
S17 Manufacture of Transport Equipments
S18 Manufacture of Electrical Machinery and Apparatus
S19 Manufacture of Computers, Communication and Other Electronic Equipment
S20 Manufacture of Measuring Instruments and Machinery
S21 Other Manufacture
S22 Production and Supply of Electric Power and Heat Power
S23 Production and Supply of Gas
S24 Production and Supply of Water
S25 Construction
S26 Transportation, Postal, Telecommunication services
S27 Wholesale, Retail Trade and Hotel ,Restaurants
S28 Others

Table 1: Modified industry sectors of China.

Results and Analysis

Crude oil utilization efficiency

The oil utilization efficiency, i.e. oil intensity, is indicated by two indicators in this paper: the direct oil consumption coefficient and the complete oil consumption coefficient. The results of the oil utilization efficiency in 2002, 2007 and 2012 are shown in Table 2. As for the direct coefficient, most sectors have sustained downward trend from 2002 to 2012 except a few industries, such as sector No. 11 (Processing of Petroleum, Coking and Processing of Nuclear Fuel). The direct coefficient of sector No.11 grown from 2.68 × 104 to 2.72 × 104 tons per 108 CNY during 2002~2007. As for the complete coefficient, the values are larger than their corresponding direct coefficients, because it calculates the total oil used in the whole industrial chain. The trends of changes are similar with the direct coefficient, but there are also a few exceptions, such as sector No. 26.

Sector
Number
Direct Coefficient Complete Coefficient
2002 2007 2012 2002 2007 2012
S1 0 0 0 876.98 731.36 940.81
S2 2.94 0 0 1 018.15 1 357.45 980.19
S3 10 350.52 2 907.41 2 283.31 11 463.62 5 270.57 4 071.06
S4 0 0 0.02 2 995.97 3 429.23 2 302.63
S5 0 0 59.43 1 938.73 1 766.66 1 808.97
S6 0.91 0.17 0.01 807.29 654.99 531.07
S7 0.06 0.08 0 1 105.04 968.60 706.57
S8 0.18 0.17 0.06 975.88 852.41 584.17
S9 0 0.17 0.11 1 361.65 964.34 744.82
S10 0.84 0.41 0.05 1 177.95 964.04 733.98
S11 26 818.31 27 163.25 26 297.79 33 276.90 30 798.34 29 569.79
S12 1 169.96 474.00 357.31 4 009.03 3 315.91 2 643.19
S13 85.47 6.84 2.07 2 099.47 1 487.32 1 375.23
S14 9.42 0.11 0.04 2 491.50 2 839.04 1 908.99
S15 0.07 0 0 1 741.09 1 417.36 1 052.81
S16 0.26 0.09 0.01 1 390.96 1 110.15 754.03
S17 0.05 0.03 0.01 1 240.12 872.58 619.40
S18 0.70 0.10 0.02 1 575.27 1 309.36 941.29
S19 0 0.08 0 874.19 502.18 331.81
S20 0 0.07 0 1 136.17 691.68 471.15
S21 1.52 0 0 997.43 862.44 671.58
S22 87.55 3.02 0.63 1 981.67 1 602.80 1 164.38
S23 0 2.83 0 4 571.51 1 671.34 1 044.66
S24 0 0 0 912.96 971.64 654.66
S25 1.49 0 0 2 019.23 1 711.40 1 347.90
S26 88.44 45.22 18.62 2 415.59 3 039.84 2 149.65
S27 0.05 0 0 903.36 605.31 359.93
S28 0.26 0 0 804.36 884.12 824.91
Average 719.17 495.32 406.61 - - -
Table 2: The direct and the complete oil utilization efficiency.

Amount of exported embodied oil

According to the model built above and annual data, the amount of oil embodied in China’s export trade of all industry sectors are calculated as shown in Table 3. The total domestic oil consumption in China and the proportion of exported embodied oil on the domestic consumption are also displayed in Table 3. With the rapid development of China’s export, export of “Made in China” especially, the amount of exported embodied oil is also grown. It can be seen from Table 3 that both the total domestic consumption of oil and exported embodied oil have massive growth from 2002 to 2012. The growth rate of exported embodied oil is 110%, which approximately equals that of domestic consumption (107%). In 2007, the percentage of exported embodied oil is around 34%, which means there are about 34% of China’s oil consumption are contributed to other countries through international trade. But the trend has revealed a clear decline trend after 2007. The main reasons include but not limit to: implement of China’s Energy Saving and Waste Reduction Plans made the energy use per unit GDP decline, the Global Economic Crisis affected China’s export trade scale, and China’s export structure were improved in recent years (Table 3). From the perspective of individual industry sector, the contributions of exported embodied oil vary widely, as shown in Table 4. Four sectors, No. 11 (Processing of Petroleum, Coking and Processing of Nuclear Fuel), No. 12 (Manufacture of Raw Chemical Materials and Chemical Products), No. 19 (Manufacture of Computers, Communication and Other Electronic Equipment) and No. 26 (Transportation, Postal, Telecommunication services) are the first four largest sources of exported embodied oil in 2002, 2007 and 2012, and their contributions account for 48%, 49% and 51% respectively (Table 4).

2002 2007 2012
Embodied Oil in Export(104 tons) 5 289 11 635 11 129
Domestic Oil Consumption(104 tons) 22 541 34 032 46 679
Share 23.46% 34.19% 23.84%

Table 3: China’s exported embodied oil and the share on domestic consumption.

No. 2002 2007 2012 No. 2002 2007 2012
S1 41.59 35.14 37.10 S15 185.57 433.95 359.89
S2 16.05 19.48 3.70 S16 181.84 600.02 709.36
S3 138.70 39.73 28.61 S17 81.04 302.42 368.51
S4 5.60 13.87 6.03 S18 320.23 766.22 850.63
S5 29.30 21.68 14.56 S19 434.27 1343.05 1315.95
S6 72.13 112.22 114.15 S20 168.55 241.26 88.60
S7 300.56 724.61 291.83 S21 42.57 86.60 26.42
S8 270.83 463.34 547.32 S22 10.16 9.23 7.22
S9 90.74 217.15 225.47 S23 0 0 0
S10 116.27 214.11 371.49 S24 0 0 0
S11 875.19 1252.08 1399.78 S25 21.12 56.63 64.74
S12 872.52 1901.23 1849.49 S26 381.97 1160.33 1059.75
S13 87.70 207.30 296.25 S27 260.88 259.33 299.14
S14 114.91 873.14 528.00 S28 168.83 281.28 264.72

Table 4: China’s industrial exported embodied oil in 2002, 2007 and 2012.

Influence factors of embodied oil

The change on the amount of embodied oil in international trade are derived from combined action of three effects (technology, structure and scale) by using the Structure Decomposition Analysis method.

The results of the analysis on embodied oil between 2002~2007 and 2007~2012 are displayed in Table 5. It can be seen from Table 5 that China’s exported embodied oil increased 6 346 × 104 tons from 2002 to 2007, while the increasing trend was restrained during 2007~2012 (decreased 507 × 104 tons). The scale effect is positive, while the technology effect and the structure effect are negative (Table 5). The industrial distributions of China’s exported embodied oil during 2002~2007 and 2007~2012 are also analyzed, as shown in Figures 1 and 2 respectively. It can be seen from Figures 1 and 2 that the export scale effect is always the major part of positive promotion, while the technology effect is the major part of negative influence. The export structure has lesser impacts, comparing with the other two effects. The industry sectors of No.S1~No.S6, No.S22, and No.S23 export pretty small amount of oil embodied in international trade. The reason is all of these sectors are low energy consuming or have very small value of exports due to their own industrial characteristics. The scale effect of sector No.S12 Manufacture of Raw Chemical Materials and Chemical Products is the largest source for the increment of exported embodied oil, even its technology contributes a large negative effect.

Unit: 104 tons 2002~2007 2007~2012 2002~2012
Changes of Embodied Oil 6346 -507 5840
Technology Effect -917 -3024 -2893
Structure Effect -948 -757 -1484
Scale Effect 8211 3274 10216

Table 5: Influence factors of embodied oil in China’s export during 2002~2007, 2007~2012 and 2002~2012.

oil-gas-research-embodied

Figure 1: Influence factors of the change on exported embodied oil during 2002~2007.

oil-gas-research-Influence

Figure 2: Influence factors of the change on exported embodied oil during 2007~2012.

Conclusions

The amount and the pathway of oil flow embodied in China’s export trade during 2002~2012 are calculated by using the Input Output Model, the Structure Decomposition Analysis and China’s public annual data. The results show that, the total exported embodied oil has grown from 0.58 × 108 tons in 2002 to 1.11 × 108 tons in 2012, which account for a large percent of China’s domestic oil consumption. Four sectors (Processing of Petroleum, Coking and Processing of Nuclear Fuel; Manufacture of Raw Chemical Materials and Chemical Products; Manufacture of Computers, Communication and Other Electronic Equipment; Transportation, Postal, Telecommunication services) are the top largest sources of exported embodied oil in 2002, 2007 and 2012, and their total contributions account for 48%, 49% and 51% respectively. The export scale effect is always the major part of positive promotion, while the technology effect is the major part of negative influence. The export structure has lesser impacts, comparing with the other two effects. The oil flow embodied in international trade and its influence factors should be considered during the development and management in the future.

Acknowledgments

The authors would like to give many thanks to the National Social Science Foundation of China (Grant No. 13 & ZD159) for sponsoring this research.

References

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