China, the worlds top crude oil importer, will raise its non-state crude oil import quota for 2021 by 20% on-year to 243 million tonnes, the countrys commerce ministry said on Monday.

The country has been a critical market for oil producers forced to dump excess supplies at decades-low prices during the height of the COVID-19 pandemic.

The first batch of imports quota will be issued to qualified companies before Dec. 31, the Ministry of Commerce said.

The spike in quota may be in response to the new refining capacities to be launched by private refiners such as east China-based Zhejiang Petroleum & Chemical Co (ZPC) and Shenghong Petrochemical, industry sources said.

ZPC, located in Zhoushan city of Zhejiang province, is scheduled to start a new 200,000-barrels-per-day crude unit by the end of this year.

Liangyungang-based Shenghong Petrochemical may also start purchasing crude oil around mid-2021 to prepare for the launch of its greenfield 320,000-bpd refinery in 2022, a company official has told Reuters. The ministry said quotas to the refiners will be adjusted based on the actual imports situation, operational need and new applications in the country.

Non-state quotas are mostly for importers and refiners that are outside the countrys dominant oil and gas majors.

China was the only major crude consumer with increased oil demand in the April-September quarters from the year before.

Over the first three quarters of 2020, China brought in 416 million tonnes of crude oil, up 12.7% on-year, as Chinese refiners ramped up purchases of cheap crude oil to meet demand recovery in domestic fuel and also to build up record-high crude stockpiles.

Source: Reuters (Reporting by Muyu Xu in Beijing and Chen Aizhu in Singapore, Editing by Shri Navaratnam and Sherry Jacob-Phillips) Answer ALL questions Questions a. Define import quota and describe in detail the purpose of imposing import quota by the authority. b. Show the impact of import quota on local quantity demanded and quantity supplied of crude oil as well as its price. Illustrate this on a diagram.

c. Using diagram in part (b), show and discuss the impact of import quota on consumer, and producers.( Discuss the impact using areas of gain and loss of consumer and producer surpluses) (6 marks)

d. On similar diagram, show the area of welfare losses (net domestic losses) from imposition of the import quota.

e. If the authority is given a choice to use import tariff, do you suggest it to be imposed rather than import quota? Why? Explain.