Impact of CPEC Transit Routes on Environmental Sustainability: A Case of Global Oil Supply to China

Impact of CPEC Transit Routes on Environmental Sustainability: A Case of Global Oil Supply to China

Sajid Nazir, Khawaja Masood Raza
Copyright: © 2022 |Pages: 11
DOI: 10.4018/IJCEWM.311463
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Transit routes play a significant role in the transportation of goods and services in a supply chain. A short and safe transit route improves overall transport efficiency and environmental sustainability while reducing logistical costs. Since China's need of oil is increasing day by day, the logistics service providers (LSPs) continually seek a quick and safe transit route for faster demand response time with a low price. China Pakistan Economic Corridor (CPEC) is a new hope for LSPs for the supply of oil and other goods to China with a short and safe transit route. The traditional sea routes of oil supply are very long and time-consuming. However, through the development of CPEC, the results have shown a massive decline in route distance, delivery time, and cost that will help the LSPs with continuous supply with low costs and promoting environmental sustainability.
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1. Introduction

Transportation plays a central role in the supply chain management for the movements of goods and services from one part to the other end (Liu, X. 2014). Logistics service providers are the backbone of transportation services in a country. Therefore, it is essential for a country to provide well-developed transport infrastructure to its user as it has a great contribution to its economy (Badassa et al., 2020). Therefore, China’s $46 billion investment in the Pakistan-China-Economic Corridor is part of China's plan to provide Europe, Africa, and the Middle East with short and safe routes to China (CPEC). The traditional routes comprising the Indian Ocean and Strait of Malacca account for more than 70% of China's traffic in products and oil. The Strait of Malacca route is very long and unsafe for the continuous movement of oils and goods to China i.e. in the event of a confrontation between these two countries, it has a detrimental effect on energy supplies, requiring vessels to travel hundreds of miles longer via alternate transit routes for oil sourcing (Mehar, A.2017). Therefore, China has invested a billion dollars in Pakistan to build an alternate transit route for trade and logistical activities (Chowdhary, M. 2015). The CPEC will connect the Pakistani Gwadar Port with Kashgar city in China, situated in eastern China, and allow trade activities with the Middle East, Africa, and Europe to follow shorter transit routes. Pakistan is a connecting point between China Middle East, Africa, and European countries for its geostrategic location, providing the shortest transit route (Jilani, M. 2017). As China's oil dependency grows every year, China is becoming the world's leading oil importer (Shuang, F. 2017). According to the director of energy research in China, China will keep importing oil from abroad markets in the future to meet its country's energy needs (Panneerselvam, P. 2017). In China, the supply of energy comes mainly from the Middle East. The traditional Middle Eastern and African energy routes are long and time-consuming at the moment. At the same time, the development of the China-Pakistan Economic Corridor will link China to the Middle East and Europe through short and safe transit routes. Since the total cost of the product is primarily based on logistical activities, short transit routes help minimize lead time, boost customer satisfaction, and lower the overall price of the product. The longer transit routes increase the lead time, decrease customer satisfaction, and increase the product's final cost (Ghaderi et al., 2016).

Consequently, China is seeking to reduce transit time through the development of CPEC to make logistics activities more efficient. Therefore, the research objective is to highlight the impact of CPEC as a transit route in the context of oil trade to China. Consequently, this research focuses on the following purposes,

  • 1.

    To study various trade routes via Pakistan under the CPEC initiative

  • 2.

    To identify multiple logistical infrastructures and implications of CPEC

  • 3.

    To evaluate the logistical infrastructures under CPEC

1.1 Logistics and Transportation Infrastructure in Supply Chain

The logistics industry profoundly impacts a country's economy and substantially contributes to micro and macroeconomic levels: increasing an organization's competitiveness and creating employment opportunities (Sezer, S. and Abasiz, T. 2017). The logistical framework is a critical component of any country's or state's transportation system (Skorobogatova, O. and Merlino, I. 2017). Well-organized transportation infrastructure can increase the region's production capability (Munim & Schramm, 2018) and improves logistical activities, i.e., maintaining a more efficient flow of goods (Senin & Mileshina, 2016). Likewise, according to Badassa et al., (2020), emphasize that some distinct social traits of a region are associated with a transportation infrastructure that benefits the area economically, socially, and culturally (Badassa et al., 2020).

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