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China’s abandoned building sites are killing oil demand

RESIDENTIAL BUILDINGS developed by Evergrande in Pingyuan New Area, Yuanyang. — WINDMEMORIES - EN.WIKIPEDIA.ORG

TO GET AN IDEA of why the oil industry keeps failing to see the demand lift from China that it’s been waiting for all year, consider this: The area of buildings that broke ground in the six months through June was the lowest since 2009.

That remarkable slowdown is a problem for the cement industry, as we’ve written. But it is also reverberating through the oil market in ways that are still not appreciated, because China’s building sector is one of the world’s biggest consumers of diesel fuel, also known as gasoil. Emissions from all the trucks, excavators, and site generators that have operated at headlong rates in recent years will fall as they stand increasingly idle. That’s good news for the climate, but bad news for anyone who was counting on China’s thirst for crude remaining as unslakeable in the future as it was during the 2010s.

China’s millions of diesel engines consume just under 4% of the world’s oil. As a result, they account for a bit more than 1% of the world’s carbon dioxide emissions, a similar climate footprint to France and Scandinavia put together. On measure after measure, however, this industry looks to be in trouble.

Gasoil demand in June fell 11% from a year earlier, and in Shandong the teapot refineries — a group of privately owned processing plants that focus on turning crude into diesel — are operating at barely half of their capacity. Barring blips in 2020 and 2022, when draconian COVID-19 lockdowns brought the national economy to a juddering halt, that’s the worst performance in nearly a decade.

Diesel’s great advantage over other petroleum products is that it has such a diverse array of uses. The noise, complexity, and dirt of its engines mean that it’s rare to see it in passenger cars or motorbikes.* But it’s much more efficient than gasoline, in both financial and climate terms, at converting chemical energy into work — so it’s preferred by anyone with an eye on the bottom line.

In measure after measure, however, the vehicles and engines that consume it are struggling. With construction activity and the coal production boom of 2021 and 2022 easing, first-half production of excavators last year fell to its lowest level since 2017. (This year it’s up marginally, but still below any other of the past seven years.) The power capacity of engines as a whole, sweeping in all uses of diesel as well as gasoline and marine fuel oil, is similarly running at rates last seen in the middle of the previous decade.

The full picture may be even worse than you’d realize just from counting vehicles and engines. That’s because natural gas and batteries are cutting deep into gasoil’s traditional dominance of heavy-duty drivetrains. As recently as 2021, all but a handful of the semi-trailer vehicles manufactured to haul big truck loads were powered by diesel. So far this year, its share is barely holding above 50%, as electric and gas drivetrains take market share. The total number of diesel semi-cabs produced through June was the lowest first-half total since 2015.

The energy think-tank run by PetroChina Co. reckons that between 10% and 12% of China’s gasoline and diesel demand has already been replaced by natural gas and battery vehicles. S&P Global Commodity Insights recently quoted a PetroChina official arguing that the country’s gasoil consumption peaked last year, and will fall by 5% in 2024.

Even more bullish analysts see a troubled future. Bloomberg Intelligence’s Henik Fung and Chia Chen see diesel consumption growing until 2027 but slumping thereafter as the energy transition wipes out more than half of China’s oil demand by 2050, to the point where the country may become almost self-sufficient in crude.

Even as China’s leadership struggles to make the long-promised shift from a carbon-intensive, investment-heavy growth model toward one that focuses on less polluting consumption activities — such as finding the best place to shop for milk tea and stinky tofu — investors are failing to grasp the implications of what’s happening.

The demand weakness out of Asia that’s confounded oil markets over the past year isn’t a mysterious but temporary hiccup. Instead, it’s the sign of an economic model that has run its course, and will have compounding effects as the construction downturn ripples through all the industries that once fed its epic growth rates.

For all the forecasts of ongoing demand from the oil industry, crude production last year was still about a million barrels a day below its peak level in 2018. Expect more of the same. China accounted for about half of the world’s increase in oil consumption so far this century, and a similarly outsized share of the world’s emissions. With its engine now sputtering, the world needs to take notice.

BLOOMBERG OPINION

*Europe, which for a while disastrously promoted diesel cars as the best way to decarbonize road transport, is the major exception.

How PSEi member stocks performed — August 6, 2024

Here’s a quick glance at how PSEi stocks fared on Tuesday, August 6, 2024.


Chinese research vessel still near Sabina Shoal, says Philippine Navy

PHILIPPINE COAST GUARD PHOTO

THE PHILIPPINE Navy on Tuesday said a Chinese research vessel equipped with advanced technology designed for marine environment observation was still near Sabina Shoal, more than a week after it left a major Chinese military outpost in the South China Sea.

Chinese research vessel Ke Xue San Hao’s “zigzag” movement “indicates something else,” and no longer qualified as innocent passage, Navy spokesman Roy Vincent Trinidad told a news briefing.

He added that the Philippine Navy continues to monitor the vessel’s movements because it might be causing environmental damage. China’s reclamation in the South China Sea has reached about 3,000 hectares, he pointed out.

The Chinese Embassy in Manila did not immediately reply to a Viber message seeking comment.

The research vessel left Sanya port on Hainan Island on July 19, two days before the Philippine Department of Foreign Affairs announced it had concluded a deal with China to resume resupply missions to BRP Sierra Madre.

A handful of Filipino soldiers live on the World War II-era ship, which Manila grounded at the shoal in 1999 to bolster its sea claim.

Ke Xue San Hao left Mischief Reef on July 26 and has since passed through several areas including Second Thomas Shoal, Raja Soliman Shoal, Bulig Shoal, Hasa-Hasa Shoal, Abad Santos Shoal and Sabina Shoal.

Sabina is part of the Spratly Islands and falls within the Philippines’ exclusive economic zone (EEZ). It is 123.6 nautical miles from Palawan Island, which is facing the South China Sea.

Mr. Trinidad said the research vessel did not seek permission to do scientific research in the area. “We have checked with the Department of Foreign Affairs, there was no request to conduct marine scientific research.”

“We have to leave it up to our appropriate government agency how to deal with hydrographic surveys or marine scientific research within our [exclusive economic zone],” he added.

The Philippine Coast Guard earlier said the research vessel, which was designed by the Marine Design and Research Institute of China and built by Wuchang Shipbuilding Industry Co., is equipped with advanced technology that “enables comprehensive marine environment observation, detection, sampling and analysis.”

On Saturday, it said the vessel had exhibited irregular automatic identification system (AIS) transmissions while sailing through the northern part of Sabina.

Also on Tuesday, Raymond M. Powell, a fellow at Stanford University’s Gordian Knot Center for National Security Innovation, said China’s largest coast guard ship “The Monster” was still at Sabina Shoal as of Aug. 5.

It was near the Philippine Coast Guard’s 97-meter BRP Teresa Magbanua, which was stationed at the center of the shoal, along with six maritime militia vessels and three smaller militia boats rafted together, he said in an X message, citing satellite imagery.

The Monster ship has turned off its AIS since July 31, he added.

The Armed Forces of the Philippines (AFP) said the number of Chinese vessels it had monitored within the Philippines’ EEZ in the South China Sea from July 30 to Aug. 4 had risen to 122 from 104 a week earlier.

The vessels include 12 ships from the China Coast Guard, three ships from the People’s Liberation Army (PLA) and 106 maritime militia vessels, AFP spokesperson Francel Margareth Padilla told the same briefing.

At Sabina Shoal, there was one China Coast Guard ship, 12 Chinese maritime militia vessels and one Chinese research vessel, she added.

At Scarborough Shoal, there were three China Coast Guard vessels, six maritime militia vessels and one PLA vessel. There were five China Coast Guard vessels and 37 maritime militia ships at Second Thomas Shoal.

Scarborough Shoal is 240 kilometers west of the main Philippine island of Luzon and is nearly 900 kilometers from Hainan, the nearest major Chinese landmass.

Ms. Padilla said there were 37 maritime militia vessels and one China Coast Guard vessel near Philippine-occupied Thitu Island, two Chinese maritime militia vessels near Kota Island, one China Coast Guard vessel and four maritime militia ships near Lawak Island and two PLA vessels and three Chinese maritime militia vessels near Lankiam Cay or Panata Island.

There were four maritime militia vessels at Whitsun Reef, 30 maritime militia vessels near Iroquois Reef and one China Coast Guard vessel near Flat Island, which is part of the Spratly Islands.

A United Nations-backed tribunal based in the Hague in 2016 voided China’s expansive claims in the South China Sea for being illegal. — Kyle Aristophere T. Atienza

US Coast Guard men in Limay to help curb MT Terranova oil spill

THE SUNKEN MT Terra Nova off Bataan. — PHILIPPINE COAST GUARD FACEBOOK PAGE

MEMBERS of the United States Coast Guard and a Washington-based oceanic team arrived in Bataan province in northern Philippines on Tuesday to help the Philippines contain an oil spill from a sunken vessel.

The eight-man US team would give technical assistance to a local team deployed to recover three vessels that sank off the coast of Bataan last month, the Philippine Coast Guard (PCG) said in a statement.

MT Terranova was carrying 1.4 million liters of fuel when it capsized and sank about seven kilometers east of Lamao Point in Limay municipality, Bataan shortly after midnight on July 25, while Super Typhoon Carina (Gaemi) battered Metro Manila and nearby provinces.

Citing an aerial survey, the PCG said on July 30 it had seen “very minimal and unnoticeable oil sheens” along the shorelines of Manila, Bulacan, Pampanga, Bataan and Cavite after the spill.

A fishing ban has been imposed on Limay town, while eight areas in Cavite province have declared a state of calamity.

Interior and Local Government Secretary Benjamin D. Abalos, Jr. earlier this week said an inter-agency task force formed to address the oil spill would conduct weekly inspections.

Meanwhile, about 31,000 Cavite-based fishermen affected by the spill will get at least P350 daily.

The amount is equivalent to their average daily earnings, Justice spokesman Jose Dominic F. Clavano IV told reporters.

The International Oil Pollution Compensation Funds (IOPC) used the sinking of the MV Princess Empress last year as a “template” for their action in rolling aid this time, he added.

“[For the sinking of MT Terranova], the IOPC reacted quickly to give the payout,” he said. “The last time, it took six months. We expect it to be quick this time,” he added in mixed English and Filipino.

The Department of Justice (DoJ) in a separate statement said it is committed to go after the owners and crew of MT Terranova, as well as agencies that issued permits.

“Our goal is to find out if there were any mistakes or conspiracies in the issuance of licenses because this has affected many of our fellow citizens,” Mr. Clavano said in the statement.

Aside from the filing of cases, the DoJ will also provide aid to affected communities.

The oil spill from Bataan affected eight coastal municipalities in Cavite that were placed under a state of calamity last week.

Cavite Governor Juanito Victor “Jonvic” C. Remulla, Jr. has banned fishing and the sale of all marine products for safety.

The Philippine Coast Guard (PCG) last week said the oil from the tanker had reached Manila Bay.

The Department of Interior and Local Government on Saturday said it was investigating the incident as well as the sinking of the MT Jason Bradley on July 29.

About 352,000 people were affected by the spill across Southern Luzon, according to the Office of Civil Defense. Income loss from the spill was estimated at P18 million daily. — Kyle Aristophere T. Atienza and Chloe Mari A. Hufana

Congressman seeks e-sabong revival to boost state revenue

PHILSTAR

THE GOVERNMENT should legalize online cockfighting operations or e-sabong to generate state revenues, a congressman said on Tuesday, noting that the practice continues despite a two-year ban.

The government is losing revenues it could have collected from regulating online cockfighting, Party-list Rep. Marissa P. Magsino told a House of Representatives hearing.

She made the proposal after a sweeping ban on Philippine Offshore Gaming Operators (POGO).

The Philippine Amusement and Gaming Corp. (Pagcor) generated about P6.2 billion from license fee collections of legal online cockfighting operators from 2021 to 2022, Chairman Alejandro H. Tengco told congressmen.

“To generate funds, would it be possible to create a law legalizing it because it remains prevalent anyway?” Ms. Magsino asked in Filipino.

Ex-President Rodrigo R. Duterte in May 2022 banned internet-based cockfighting after dozens of gamblers who got hooked went missing. President Ferdinand R. Marcos, Jr. upheld the ban in December 2022.

About 30 gamblers went missing between 2021 and 2022, prompting a congressional probe. The cases remain unsolved.

“If made into law… we have nothing more to do but follow it,” Mr. Tengco said in Filipino.

The Philippine Charity Sweepstakes Office (PCSO) should study how much the government could earn from making online cockfighting, Quezon Rep. David C. Suarez said during the agency’s budget hearing.

“Because there’s no proper regulation, proper monitoring and policies being implemented, maybe PCSO or Pagcor… could make a position paper [on legalizing online cockfighting],” he said.

At Pagcor’s budget hearing, Northern Samar Rep. Paul R. Daza proposed a “better version” of POGOs.

“Learning from experience, without the bad elements, [let’s] come up with a better version that will help the economy,” he said.

Mr. Tengco said Pagcor would lose as much as P7.5 billion in yearly revenue from the POGO ban that President Ferdinand R. Marcos, Jr. ordered last month. — K.C.L. Basilio

Philippines’ DFA calls for peaceful transition in Bangladesh after protests

REUTERS

THE PHILIPPINES on Tuesday called for a peaceful and orderly transition of power in Bangladesh after former Prime Minister Sheikh Hasina quit at the weekend after weeks of violent street protests.

“The Philippines conveys its solidarity with the people of Bangladesh and commits to efforts aimed at restoring peace and stability in Bangladesh,” the Department of Foreign Affairs (DFA) said in a statement.

It said the Philippine Embassy in Dhaka is ready to help Filipinos based in the South Asian country.

Last week, the DFA placed Bangladesh under Alert Level 1 amid the protests, calling for Filipinos in the country to stay indoors and to keep an eye on the situation.

There are about 700 Filipinos in Bangladesh, Foreign Affairs spokesperson Ma. Teresita C. Daza told reporters in a Viber message.

The prime minister fled to India after Bangladeshis protested a quota system for government jobs that reserved a third of posts for the descendants of those who participated in the country’s 1971 liberation movement.

Bangladesh’s High Court reinstated the rule in June, which also reserved 56% of state jobs for children and grandchildren of freedom fighters, women and people from “backward districts,” Al Jazeera reported.

At least 41 people died, while 200 others were hurt in the protests, according to the Associated Press. — John Victor D. Ordoñez

Phone ban in schools backed

Students attend a class at the Commonwealth High School, in Quezon City, Metro Manila, April 18, 2024. — REUTERS

ABOUT 8 of 10 Filipinos favor a proposal to ban mobile phones in schools to keep students stay focused on their studies, according to a June poll by Pulse Asia Research, Inc.

The poll commissioned by Senator Sherwin T. Gatchalian showed 76% of Filipinos backed the ban, while 13% disagreed. About 11% said did not have an opinion.

Pulse Asia interviewed 1,200 adults on June 17- 24 for the poll, which had an error margin of ±3 points.

Mr. Gatchalian earlier filed Senate Bill No. 2706 or the Gadget-Free Schools bill, which tasks the Department of Education to craft guidelines on the phone ban in both private and public schools.

“Clearly, our fellow citizens support our proposal to ban the use of cellphones in schools, especially since their use in class time can be detrimental to students’ learning,” Mr. Gatchalian said in a statement in Filipino.  John Victor D. Ordoñez

House approves LDF bill

PHILSTAR FILE PHOTO

THE HOUSE of Representatives on Tuesday approved on second reading a bill that seeks to give the Loss and Damage Fund (LDF) Board a legal personality and allow it to operate in the Philippines.

Approved via voice vote, House Bill No. 10722 gives juridical and legal personality to the LDF Board, allowing it to buy assets and enter into contracts in the Philippines. It will also authorize the Board to negotiate with the World Bank.

The LDF Board is exempt from property and transaction taxes under the measure. It also exempts visiting Board officials from income taxes.

“The task of providing an enabling law conferring legal personality to the Board has fallen to this august chamber,” Bohol Rep. Edgar M. Chatto said in a sponsorship speech in plenary. “The Board is accorded legal personality and capacity where it can enjoy certain privileges and immunities.”

The Philippines in July won the bid to host the LDF. Philippine President Ferdinand R. Marcos, Jr. earlier said this reinforces the country’s dedication to become a leader in shaping international climate policies. — Kenneth Christiane L. Basilio

P5B more released for 4Ps

PHILIPPINE STAR/ MICHAEL VARCAS

THE DEPARTMENT of Budget and Management (DBM) on Tuesday said about P5 billion from last year’s budget would be released for the government’s conditional cash transfer program.

In a statement, the agency said the fund seeks to help ease the effects of rising prices on more than 700,000 households under the Pantawid Pamilyang Pilipino Program (4Ps).

“The DBM will do its part to streamline budget processes so that our citizens benefit from faster and more efficient delivery of essential services such as our 4Ps,” Budget Secretary Amenah F. Pangandaman said in the statement. — BMDC

ILO, Canada work vs child labor

THE International Labour Organization (ILO) and the Canadian government has partnered to strengthen freedom of association and combat child labor in the Philippines through a five-year project launched on Tuesday.

The project aims to promote the enforcement of international labor standards. It is funded by the Labour Program of Employment and Social Development Canada.

“Canada sets the bar on workers’ rights around the world,” Canadian Labor Minister Steven MacKinnon said in a statement. “Supporting our trading partners to strengthen workers’ rights is how we make sure those rights are upheld everywhere, so every worker has a workplace that is fair, safe and equitable.” — Chloe Mari A. Hufana

Maoist rebels convicted

THE DEPARTMENT of Justice Task Force on Counter-Terrorism I (DoJ-TFCT 1) on Tuesday said it scored a victory after a Mindoro Oriental trial court convicted two Communist Party of the Philippines-New People’s Army (CPP-NPA) members for the unauthorized issuance of authority to carry and illegal transfer of firearms.

Assisting Judge Jose C. Real, Jr. meted each defendant with a jail time of a year per crime.

“The period within which they are detained shall be credited in full should they abide by and follow the rules and regulations of the institution where they are continuously detained,” according to a copy of the decision promulgated on July 9. — Chloe Mari A. Hufana

Benguet vegetables saved

LA TRINIDAD, BENGUET — Benguet lawmaker Eric Go Yap has started the buying and distribution of 100 tons of cabbage and assorted vegetables for free in Metro Manila, to help farmers recover from the economic impact of Super Typhoon Carina.

Floods caused by the typhoon wreaked havoc on the trading of high-value crops after major road networks in Benguet and nearby provinces were closed. — Artemio A. Dumlao