For many people across China, natural gas shortages and alarmingly cold temperatures are making a tough winter uncomfortable. For Li Yongqiang, they mean cold nights without warmth.
Mr. Li, a 45-year-old grocer, said by phone from his home in Hebei province, northern China: “We dare not turn on the heater overnight – after using it for five or six hours. , gas is out. “The gas shortage is really affecting our lives.”
The lack of natural gas, widely used across China to heat homes and businesses, has angered tens of millions of people and sparked fierce complaints on social media.
One person in Hebei province wrote about waking up four nights a week early because she was too cold to sleep despite having two blankets on her bed. A video circulating on the Chinese internet shows a high-rise apartment building in another northern province, Shanxi, with its windows plastered with bright red posters commonly seen around the Lunar New Year – except these posters say “cold”.
Already this winter, hundreds of millions of people have contracted Covid since Xi Jinping, China’s top leader, abandoned his “no Covid” policy in early December. That policy has kept billions of dollars in check. Infection rates are low but require costly precautions such as mass testing – measures that drain local government budgets. Many towns and cities currently lack the money they need even to pay their own employees, much less to maintain adequate gas supplies for households.
Experts say the crisis has exposed systemic weaknesses in China’s regulations and energy infrastructure, while also showing the impact of global market turmoil caused by Russia’s invasion of Ukraine caused last year.
Russia has long been a major supplier of natural gas to China and many regions, especially Europe. When Russia stopped exporting to Europe last summer, countries raised world prices as they stocked up on supplies from elsewhere. Since then, an unexpectedly warm winter has helped push gasoline prices lower in Europe, but extreme cold is now pushing gas prices higher in China.
At the same time, China’s provincial and municipal governments have reduced customary subsidies for natural gas consumption, which is used to control heating bills. The national government responded by asking local governments to provide heat without giving them money to pay. As a result, gas is being distributed efficiently, with households receiving the bare minimum needed to cook food but very little for heating.
“It was a perfect winter storm for Xi,” said Willy Lam, a longtime analyst of Chinese politics. senior colleague at the Jamestown Foundation. “Nothing seems to work, in part because nobody seems to have much cash.”
This is the third grassroots energy crisis in just five years for Xi. His government abruptly banned coal-fired boilers across large areas of northern China in 2017 in favor of gas. It was a quick way to fix air pollution, but residents quickly realized that there was not enough gas for all the new boilers.
Then, in 2021, the price of coal rises above the specified price at which power companies can sell electricity from coal. Not wanting to lose money, power companies temporarily shut down power plants, contributing to a wave of blackouts.
Many in Europe worried last year How will they heat their homes this winter after President Vladimir V. Putin of Russia cut and then halted natural gas shipments to the continent.
But Europe has not only had an anomaly warm winter. Gas companies there have raised prices, encouraged conservation, and the government has subsidized consumers to offset at least part of the extra costs. Last fall, European companies also accumulated a large amount of gas reserves. Worries that European homes won’t have enough natural gas to heat their homes this winter have dissipated.
In China, the temperature turned unusually cold. Over the weekend, multiple weather stations in China’s northernmost Heilongjiang province hit their lowest temperatures they’ve ever recorded. The city of Mohe, China’s northernmost city, has hit a three-day low of minus 50 degrees Celsius. The China Meteorological Administration has issued a nationwide warning for very cold weather this week. .
The government has paid attention to the gas shortage.
“Some localities and businesses have not taken measures to ensure energy supply and prices for people’s livelihoods,” said Lian Weiliang, vice chairman of the National Development and Reform Commission, the agency. China’s top economic planner, said at a press conference on Jan. .
He added that the national government would require local officials responsible for providing housing, but did not indicate that Beijing would provide any money to help them do so. China will also build more natural gas storage sites to try to avoid similar problems in the future, he said.
Yan Qin, a China energy expert at Refinitiv, a data firm in London, said China actually has enough natural gas to last through the winter. The problem is that price regulations and reduced subsidies are preventing gas from reaching households in northern China as temperatures plummet.
Much of the world shunned Russian energy during the war, but China increased its purchases of natural gas from Russia. Imports of liquefied natural gas from Russia, which can be shipped by sea, jumped 42.3% last year, as Chinese companies bought goods that businesses in Japan and elsewhere no longer have. willing to buy because of Russia’s invasion of Ukraine.
Much of that Russian gas is imported at very high prices. But Chinese regulations severely limit the prices at which gas distributors in cities and towns are allowed to sell gas to households. Jenny Zhang, a natural gas specialist at Lantau Group, a Hong Kong-based power and electricity consulting firm that specializes in the mainland, said this winter the wholesale cost of gas was three times the price. that distributors are allowed to charge for residential customers. China.
Distributors are allowed to pass on additional costs to industrial and corporate gas users, but not to individuals. So when prices rise, companies have a big incentive to cut down homes and sell mainly to industrial and commercial users.
The problem is particularly acute in the densely populated Hebei province near Beijing. Many local gas companies have been at least partially privatized in recent years.
“They don’t have a lot of money when gas prices fluctuate,” said Ms. Zhang.
And local governments in places like Hebei are under severe financial strain.
Their main source of revenue, selling land to developers, dried up last year as pandemic costs skyrocketed. Lease to developers plummeted 53% last year as the real estate sector struggled financially.
Hebei province, which surrounds Beijing on three sides and has a population of 74.5 million, suffers the worst. The national government has been particularly adamant over the past five years that households and businesses in Hebei turn to gas because air pollution from their coal use quickly spills over into Beijing. Many residents, including Mr. Li, the grocer, no longer have coal or coal-fired stoves.
Shijiazhuang, the provincial capital, was then one of the first cities to run out of money for Covid testing last fall. The country quickly abandoned testing late last year just as Beijing began signaling flexibility to its “no Covid” policy, only to end up with an immediate wave of infections. Temperatures in the mountainous province are now falling far below freezing.
With revenues falling and costs rising, local governments in Hebei have little financial opportunity to quickly resume gas subsidies for their customers.
“If they could subsidize it,” said Qin, China energy expert, “we wouldn’t have this shortfall.”
Research contributed by Li You, John Liu, Olivia Wang and Claire Fu.
