By IPS Correspondents
BEIJING, Nov 13 2007 (IPS)

China’s fast-growing economy might appear impervious to rising oil prices but government leaders are jittery as crude surges toward the sensitive 100 US dollar mark.

One sure sign of nervousness is a delay in the introduction of an anticipated tax on fuel, until oil prices recede. Another is Premier Wen Jiabao’s visit, this week, to Beijing’s poorer neighbourhoods in a publicised show of concern over rising inflation.

Meanwhile, the release of the annual forecast of the International Energy Agency (IEA), which predicts that China will displace the United States as both the world’s biggest polluter and the largest energy consumer by 2010 has been met with a wave of official scepticism.

The timing of the release last week, which came as international oil prices hit 96.90 dollars a barrel, was termed "inappropriate" by Chinese officials as it seems to assign blame for rising crude prices to China and India – whose soaring demand would be driving energy consumption growth in the years to come.

"The annual World Energy Outlook by IEA is merely a scientific projection, based on forecasts and scientific analysis, and it does not have any political background," Li Junfeng, an energy official from the National Development and Reform Commission, the country’s top planning body, told the media at a press conference. "My worry is that the (IEA) report could be used by other people with very definite political motives.’’

The sobering report, which solicited the opinions of some 50 Chinese experts, portrays a world that by 2030 will be consuming 55 percent more energy than it is now, with almost half of the growth caused by surging demand in China and India.

As a country most scrutinised for its role in the global energy markets, China has been trying to keep a lid on its energy use, both to control pollution and to keep prices from skyrocketing.

Still, the Chinese leadership was forced to raise domestic fuel prices in the beginning of the month by nearly ten percent after thousands of gas stations, saddled by government-imposed price caps, closed shop or began rationing diesel. The rationing led to an embarrassing incident in Henan province where one man was killed in a brawl over jumping the line at a gas station.

As the price hikes sank in, bad news continued to pour. Several days later, three bargain hunters were killed in a stampede when shoppers scrambled to buy discounted cooking oil at a Carrefour store in the western Chinese city of Chongqing.

The Nov.1 jump in prices – the first in 18 months – came despite a pledge by Wen to keep the lid on existing price caps for fear that it might increase already rising inflation.

Soaring food prices have caused inflation to jump this year, hitting a ten-year high last month. After initially dropping from a record high of 6.5 percent in August, the consumer price index, a main gauge of inflation, rebounded in October to match its August level.

The government&#39s main concern is that higher fuel prices could have a domino effect on other fuels and energy sources that could squeeze China’s poorer residents. Rising fuel prices and the resulting inflation sparked street protests in Indonesia two years ago, and was blamed for the August/September unrest in Burma.

China, where economic disparity between the urban and rural areas has been growing, already faces a significant risk of social upheaval. Last year rights groups reported some 90,000 protests against local governments over land disputes and rampant pollution.

The government team led by President Hu Jintao has made equalising growth and helping poor peasants in inland provinces its top policy priority and is loath to see any social discontent arising from fuel price hikes.

"The higher than targeted inflation in the first nine months of this year is the reason why domestic fuel prices were not (initially) allowed to keep pace with surging international crude oil prices," Liu Zhenqiu, price bureau chief with the National Development and Reform Commission told the Central Chinese Television on the weekend.

Also on the weekend, Chinese officials said the government would delay the implementation of a controversial fuel tax that has been in the workings for more than ten years. Chinese media reports had said earlier that the tax would be imposed in March next year.

"Now is not an appropriate time to carry out the tax policy, as the government plans to launch it only when international oil prices are low," Chen Qingtai, research fellow with the State Council’s Development Research Centre, said at a car industry forum in Beijing.

The tax is seen as a tool for curtailing fuel consumption and worsening air pollution in thousands smoggy cities where number of vehicles have shot in recent years. Beijing, in particular, has been eager to clean up its air by reducing car emissions by next year, when it plays host to the Olympic games.

Worries about inflation and social unrest, which have prevented the government from liberalising energy prices, are working also against Beijing’s plans to increase energy efficiency. Experts say allowing the market to control energy prices would naturally encourage efficient use of oil and gas.

The country is lagging behind declared targets for making its economy more energy efficient by using 20 percent less fuel by 2010. Targeting a four percent reduction in energy use per unit of gross domestic product, last year, China managed a drop of just 1.3 percent.

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