Cars driving China's oil demand

China's escalating demand for oil can be traced to increased auto sales in the country and government subsidies that keep prices low, analysts said.

Although subsidies were partly lifted recently, gas now costs $3.40 per gallon in China. SUV sales, meanwhile, rose 43 percent in May this year compared with May 2007 and sales of full-sized sedans jumped 15 percent, The Washington Post reported Monday.

The country now has 15.2 million private cars, which puts it on par with the United States of 1915, when less than 4 percent of the population owned a car.

"The entire energy market of the world is being affected by this country already. Can you imagine when we get to 50 people out of every 1,000 in China owning cars?" asked Friedhelm Engler, design director for an joint Chinese-General Motors design lab in China.

The purchase of cars has government support. Bicycles are now banned on some streets in Beijing. The city of Dalian and others have banned smaller cars on the premise they are old and dirty, the report said. And several municipalities have cut sales tax and worked with banks to make car loans available, the report said.