Those who claim that the current price of oil is a supply – demand deal have some new ammo. Industrialinfo.com reports that The People's Republic of China imported 90.53 million tons of crude oil in the first half of 2008, up 11 percent over the same period last year. And you know all those dollars we send over to China to build the cheap stuff we buy at Wal-Mart? A big chunk of that went to "Angora, Saudi Arabia and Iran" [sic]. "The value of imported oil rose to $64.98 billion, representing a dramatic 85.8% increase in costs." Although China exports some oil (2.37m barrels worth $1.42b), experts reckon the percentage of imported oil will continue to rise. The only possible brake on Chinese oil consumption: the lowering of government subsidies. The New York Times pegs that number at $40b per annum. So far, nothing much happening on that front. All of which means the current status is likely to remain quo.
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Sure am glad (some of) my politicians are telling me to use less gasoline. Wouldn’t want communist China to be inconvenienced because us evil capitalist using up the world’s oil. I wonder if there’s anyway American companies (or hell even government) could buy Chineese fuel after it’s been subsidized and sell it back to the American people?
I can’t find the article right now, but I read (it was a UK new daily) that Chinese consumption is up specifically because of the run-up to the Olympics. It also said that it’s consumption overall would be up 2% if not for the Olympics, and that there are major changes in store for its citizens after the games are done and gone. Due to the crude price jumping, the government is bleeding cash and not happy about it.
Not that I believe everything I read, but I feel there’s probably some truth to it.
Well, maybe their attempts at cleaning up the air in and around Beijing prior to the Olympics will “spike” their consumption down a bit.
Angora? I think you meant Angola.
Although mentioning Iran/US relations as a stability issue, the Times’ passed over Iranian and Iraqi subsidies. The brainstem Ayatollas can’t even refine enough gas for their populace, so they subsidize imports! And Iraqi subsidies result in lucrative smuggling opportunities for organized criminals.
It’d be interesting to see a chart with a comparison of gas prices worldwide (minus taxes and subsidies). Hello ‘The Economist’ editors???
Ya know what is hard – reading the labels and trying not to buy things made in China. A good first step is to never to Wal-Mart as they are a China outlet store. Target is close behind.
Fuel is subsidized in the PRC. They spent 40 billion US in subsidies last year.
The Chinese are not alone. Most Southeast Asian countries have fuel subsidies as well. So, the whole region is increasing its per capita petroleum use.
That would be hilarious if it wasn’t so sad. They’re drilling directly off our coast in the Gulf, and selling what would have been our oil, back to us! To quote Daniel Plainview, they drink our milkshake! Awesome. It’s better this way because if we had been able to drill there I’m sure it would have been much harder on the environment than with those exemplary stewards of of the Earth, The Chinese.
jaje Says:
July 28th, 2008 at 8:27 am
Ya know what is hard – reading the labels and trying not to buy things made in China. A good first step is to never to Wal-Mart as they are a China outlet store. Target is close behind.
Short of a cottage industry, I think it would be difficult to find any finished good mfg’d in the US that doesn’t have a majority of imported content.
From the standpoint of setting global prices, it makes no difference whether China imports its oil or produces its own. Because oil is a fungible global commodity, it makes no difference to the world price whether Country X imports its oil or sources it domestically.
China is importing more oil because their domestic sources are limited. Their growth in demand should be slowing as their export markets slow down, thanks to the global recession/slowdown that is now underway. If we don’t need stuff, their factories won’t produce as much.
We need to keep in mind that much of the demand growth in Asia is due to western countries that have been offshoring production there. While demand in Southeast Asia grows, demand in Japan and some countries in Europe was falling even before prices increased. When a US factory shuts down and ships its jobs to China, its energy consumption gets shipped right along with it.
A few weeks ago, China increased fuel prices 18%. It would appear that if the west is not going to consume as much, the Chinese government is less interested in stimulating growth through subsidies. At the same time, China is experiencing substantial inflation, due to its strong economic growth. So you can expect a slowdown and a curtailment of consumption growth along with it.
The only sure thing you can say about the Chinese is that they are paranoid. I have a friend who runs the Chinese division of a UK specialty chemical company. He told me last week that the Chinese govt. has shut down the shipment of all chemicals inside China for commercial purposes for 5 months (3 before and 2 after) around the Olympics. Why? Potential Terrorism.
How does this impact oil markets? Who knows. But it sure is a little crazy.
Why would they export any oil if they are also importing it? Are they exporting high sulfur oil and importing low sulfur or vice-versa?
http://dsc.discovery.com/convergence/koppel/koppel.html
A good watch. Turn off the audio if you like and just look at the cities and hordes of people. Is it any wonder that we’re competing with them?
I have no interest in funding the Chinese gov’t. I have no problems with the people though. Was proud to say that my wife and son were able to buy American made school supplies – some of it – last night. Didn’t think any of that was still made here.
Wish there was a list of American goods somewhere on the web that would link the consumer to the goods and the retailers.
There you go – a business for somebody – the “Made in the USA” store. Everything sold there is made in the USA.
Those who claim that the current price of oil is a supply – demand deal have some new ammo.
Old news:
http://www.bloggingstocks.com/2008/06/11/china-oil-consumption-jumps/
Also, the argument doesn’t follow either. 11% of the ~4.4Mbbl/day China imports is +0.481 Mbbl/day. The latest EIA numbers for the USA show a yearly decrease in consumption in excess of a million barrels per day:
http://peakoildebunked.blogspot.com/
“That’s a year-on-year drop in U.S demand of 1,103,000 barrels/day.”
Demand and supply is just words. It doesn`t work for indispensable goods. Just look at the amount of construction work going on in Dubai. besides Burj Dubai, they are doing site prep for a mile! high tower, formerly known as Al Burj. Will be built by Nakheel. here we can see when some countries using consumers helplessness swim in cash! Right, Chinas consumption has increased, that is why , we, unfortunately have to generate mind boggling profits, from year to year. Right. Hitler would simply liquify the whole Arabian penninsula. And I wouldn`t mind.