Thursday, July 02, 2009

China Now More Dependent on Foreign Oil Than US

If there is one rule in 2009 that applies, it's this: the old rules no longer apply. We're in a strange new political and economic era that is largely the result of 30 years of Republican shortsightedness. For thirty years, the US drifted without a significant energy policy. For thirty years, the US allowed good paying jobs to disappear overseas. From time to time, Republicans of course had help from a few dim Democrats. Nevertheless, Republicans were the driving force behind the economic policies of the era now ending.

Here's an article in The Globe and Mail about China's growing dependence on foreign oil:
China's dependence on foreign oil has surpassed that of the United States, as consumers race to the pumps to fill their new cars with gas and the country feverishly stockpiles supplies to take advantage of weak markets.

The country's increasing appetite has driven it to spend billions to acquire foreign oil producers and construct vast storage facilities to safeguard future needs. It also helps explain a rapid rise in oil prices this year, which many attribute to speculators gambling on an economic recovery.

Whatever one may think of China's domestic politics about such issues as Tibet and human rights, the Chinese are thinking about the future. The more oil China stores, the more it can ride out the ups and downs of the markets. And the more time it has to convert to alternative energy sources, both clean and dirty.

Of course oil was cheap seven years ago. At that time Bush and Cheney could have pushed for building up the Strategic Oil Reserve. Instead, they both opted for a war in Iraq. Given that both Cheney and Bush were oil men, many people, with good reason, believe the war in Iraq was about acquiring new oil assets. It's ironic then that we're seeing articles like this one in The New York Times:
Oil companies from China, the world’s second-largest and fastest-growing consumer of oil, bid aggressively on Tuesday as Iraq began auctioning licenses in six large oil fields.

A partnership of BP and the China National Petroleum Corporation, or C.N.P.C., won the first contract awarded, in the latest indication of Chinese interest in Iraq, a country that has until recently seemed to be firmly in the American sphere of influence for natural resources.

Republicans, and many other Americans for that matter, have still not come to terms with the enormous damage that Bush and Cheney have done to our nation. There are consequences to cowboy diplomacy and it's hitting us in the pocketbook. Here's a story from Reuter's:
Sinopec's $7.2 billion bid for oil explorer Addax Petroleum (AXC.TO) is a sign that China's energy giants find it easier to secure reserves in parts of the world where there are fewer hang-ups about Beijing owning local natural resources.

Africa and the Middle East, where Swiss-based Addax has its main assets, are more politically disposed to China than are developed nations such as the United States, where local politicians blocked CNOOC's (CEO.N) $18.5 billion bid for oil company Unocal in 2005, analysts say.

China is and will remain a cipher to many nations for many years to come. For some time, that will give an advantage to China over the US. But ironies are never at an end in this new era. As China drives up the price of oil, we can expect two things. First, the higher price will make it easier for many expensive and sometimes marginal oil projects to move forward. And the higher price will also make it more likely that many people, corporations and nations will continue to push alternative energy projects.

If we are lucky, more oil will be available to help the transition to alternative energy. And high oil prices will provide the motivation to make the transition. If American government officials, business leaders and consumers understand the new paradigm, our economy may enter the new era with reasonable stability and opportunity. If they do not understand how much things have changed, the American economy will sputter from crisis to crisis for many years to come.

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Blogger mike3 said...

And so what happens to the Chinese economy, when, say, oil reaches price levels of around, say, what we'd price at $300-$400/barrel, i.e. around 5 or so times what they are now as of this writing (August 2009), and *stay* there (i.e. terminal price increase, what the Hubbert slide gives)?

8:56 PM  
Blogger mike3 said...

And if it hits those levels in, say, 15-25 years, will China have enough renewable, etc. build up to take the punch? USA doesn't seem to be doing enough, that's for sure. If USA doesn't want to do enough then maybe China should do it instead. So would they or not? Where do you think they'll be once oil is back to 1960s levels of production?

9:01 PM  
Blogger mike3 said...

Well maybe not 1960s but 1970s or 1980s levels in 2030s...

9:02 PM  

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