Oil demand: Car sales in China are rising by
25 per cent per year, as the expanding middle
class moves to more energy-intensive lifestyles
(File photo). (Getty Images: Ian Waldie)
Posted on 11/25/2007 2:51:23 AM PST by familyop
With world oil prices nearly touching $100 a barrel in the past week, we are living through the third great energy shock of the post-war era. But this time, demand from India and China means that prices are unlikely ever to go down again.
Since 2004, oil prices have risen on a scale similar to that of the first oil shock at the start of the 1970s, and double that of the second oil shock at the end of the 70s.
China's oil consumption has doubled over the past decade and India's has increased by two thirds.
A new Australian study says the problem in the two earlier oil shocks was with supplies of oil. This time, study author Professor Michael Wesley says, the problem is that demand is unlikely to subside.
"The growth in the consumption of oil and oil products by predominantly the United States, China and India is rapidly outstripping the ability of the oil market to supply those amounts and this will inexorably drive up the price of oil," he said.
Professor Wesley predicts that this time, the prices won't drop back.
"The previous two oil shocks in 1973, 74 and in 1979-1980 were supply-side shocks," he said.
"They were generated by the inability or the unwillingness of key suppliers to put adequate supplies of oil onto world markets.
"Now they were stopped and stopped reasonably abruptly when the suppliers simply restored supplies to world markets.
"There are supply-side problems this time, but even if all of those problems are resolved tomorrow, the demand-side pressures will continue to grow and will continue to put upward pressure on oil prices."
He says this time, rising demand in the growing economies of India and China and other countries in Asia means that higher prices will just continue.
"To give you an example, sales of cars in China are rising by 25 per cent, year on year," he said.
"There are expanding middle classes in both countries, in both China and India, and they are demanding lifestyles and modes of transport that are using modern energy.
"By modern energy, I mean both oil and oil products, gas and electricity - all of which are fossil-fuel-produced.
"So there will be an inexorable rise in demand for these products and it will continue to put upward pressure on prices."
Security, war implications
Professor Wesley predicts Asian countries will start factoring energy into their security calculations, but does not see oil wars on the horizon.
"I think the major powers of Asia certainly are starting to factor energy into their calculations, but they have also made the judgment, I think, that this is not something that any one country can do on its own," he said.
"Even if China were to use its military force highly effectively and try and sew up large parts of the oil-producing regions of the world for its own consumption, the energy economy is so intertwined with the broader global economy that the powers of Asia realise that it is best managed via the market and that the oil market and the energy markets will have flow-on effects to other international markets as well.
"So it is simply not possible, or it's simply self-defeating for any one country to try and think that it can solve all of these issues for itself and by itself."
He argues that neither India nor China will give in to economic nationalism and seek to assert themselves: they will rely on the international market instead.
"I think both countries have already ultimately made the judgment that if they act too aggressively on world energy markets it starts to set up countervailing reactions," he said.
"The Chinese in particular are very, very aware of international perceptions of their rise, and they're very worried that if there are international reactions of fear about China's rise and China's aggressiveness on world markets, it could set up countervailing reactions that starts to limit what China can do in the global economy, be it the energy economy or the broader economy."
China's 'perception management'
Professor Wesley says China knows it needs to be subtle in the way it goes about its energy market purchases.
"A good example of that was when one of China's biggest oil companies, CNOOC [China National Offshore Oil Corporation] tried to takeover the US oil giant, Unocal [Union Oil Company of California]," he said.
"In the face of major opposition from the US Congress, it quietly withdrew the offer, and I think perception management was a very big part of that."
He says Asian countries are recognising the importance of energy security alongside national security, military security and economic security.
"The great powers of Asia, the great energy consuming powers of Asia - Japan, China, India - are starting to take a much greater interest in broader diplomacy, particularly into oil-producing regions," he said.
"The upsurge in creative diplomacy from these three countries into the Gulf region, into North Africa, into West Africa, into Latin America, has been noticeable in previous years and it will continue."
Professor Wesley notes that these are regions in which the United States has been the paramount power until now.
"One of the issues that we are going to confront, I think, is how the United States reacts to this: how it reacts to other diplomatic suitors coming into regions of its predominant power," he said.
Our problem is not addiction to oil, our problem has always been our addiction to cheap oil. The price of oil going up to $100 is the best thing that could happen for us. By over pricing their oil, the Arabs have finally priced themselves so high other US domestic and regional oil sources, and other sources of energy, have become economically viable.
OPEC is in the process of killing themselves. We should stay out of their way
Cartels are designed to limit the supply of a product thereby optimizing the price of the product that they sell. However, the OPEC Cartel has no control as to the price of oil since they are producing at 95% of capacity and demand keeps increasing.
Yes, OPEC is Dead but only dead in the sense that they can do noting to increase or decrease the price of oil. Thus, the only way to decrease the price is to decrease consumption.
...agreed. Despite popular media distractions, the Saudi OPEC bosses are really nervous about the situation and would rather see continued stability for the sake of their racket. The Iranian and Venezuelan oil bigwigs are nuts.
If it were not for that integration into our economy the Saudis would pull the plug on the dollar and we would be screwed.
The Arabs and "BIG Oil Companies" don't set the price on their oil, it's a commodity that is bid on daily by anyone who wants it. The Arab's can somewhat control the price by limiting the amount they provide.
By the time we get around to tapping our resources, they will belong to the Arabs or China.
“Oil prices to keep rising as demand grows”
***********************
Go figure.
Baker Hughes-US rig count down 24, Canada up 35
Reuters
http://uk.reuters.com/article/oilRpt/idUKN0947634420071123
Excerpt:
“NEW YORK, Nov 23 (Reuters) - The number of rigs searching for oil and gas in the United States fell by 24 to 1,773 in the week ending Friday, oil services firm Baker Hughes said.”
...more related information. Bloomberg and other news companies over here are running the same news.
Sinopec to import more oil products to ease domestic shortages
http://news.xinhuanet.com/english/2007-11/25/content_7142273.htm
China calls for early warning system to stabilize oil supplies
http://news.xinhuanet.com/english/2007-11/24/content_7139632.htm
As do the voters who keep sending those clymers to Congress who are blocking our domestic supplies.
Absolutely. My husband works in the Oil business and we’re looking into solar panels. There is only so much oil. It will run out sooner or later, so we need to make some preparations. .....and liberals need to understand; the Chinese, or Muslims, WILL drill ANWAR. Environment be damned.
You can drill anywhere, just be out of my sight!! that is the liberal logic. or at least that is what’s happening.
I am sure the left wing moonbats are telling the Royal Saudi family where to drill
Viable alternatives:
Coal to liquid fuel.
Mining the ocean bed for Methane Hydrate, a source of natural gas.
Reclamation of the petroleum content from oil shale, by using in-place techniques that cause minimal soil disturbance.
Use of Thermal Depolymerization to convert various organic wastes into kerogen, a substance much like crude oil, but without all the sand and gunk.
Use of plasma waste disposal, with the two-fold benefit of generating electricity directly from trash, and total destruction of practically all kinds of waste except radioactive elements. One other by-product would be aggregate suitable for road construction or concrete, which is drawn off as a slag from the conversion process. This process also generates huge quantities of gaseous hydrogen, the “fuel of the future” that is to power our homes and transportation. The other product, carbon monoxide, is an excellent fuel to power industry, with NO fly ash, no waste and essentially a “carbon-neutral” balance on exhaust emisions.
Oh, and by the way, carbon dioxide is NOT a pollutant in earth’s atmosphere. It is an essential compound in the balance of life. This superstitious fear of CO2 is on the order of a similar dread of all bacteria.
Yet without bacteria, you could not digest much of your food. Several pounds of your body weight is made up of these microscopic symbiotes.
That’s funny. Prices at my station dropped 17 cents in the past week.
Actually, the ultimate alternative is oil-laden algae. From these algae we can easily refine diesel fuel, heating oil, and even kerosene. And the “waste” from the processing can be refined into ethanol. I think with improving technologies to clean up diesel exhaust expect within 10-15 years the majority of the world’s new-production motor vehicles to have diesel engines, with an increasing mix of fuel-cell powered vehicles further down the road.
There is going to have to be some market incentive to develop both domestic oil sources and alternative fuels. That is going to require some changes in how our economy works. The rising price of gas is one of those market forces in action. Screaming for cheap gas forever is stupid. It is not going to happen.
Funny oh the same Dinocons who so loudly scream about “Big Govt” turn right around and demand the Govt do something to keep gas cheap for them. Govt is NOT the solution, govt is the PROBLEM. They all ready interfere far too much in the production of energy. The best thing they could do is stream line the regulatory process and get out of the way
Give you an example. A massive rig called Blind Faith is going into production in the Gulf. It cost over $1 Billion and took 7 years to go from concept to production. We need 160 more rigs like it just to replace what we import daily at current levels of usage!
If the cost of making that sort of domestic production cost effective is $5.00 a gallon gas Americans should be HAPPY to pay it.
$5.00-$10.00 a gallon gas is a heck of a lot cheaper price to pay then the price in blood and treasure we have spent over the last 35 years policing the Middle East!
The Saudis are in the process of cutting their own throat. We should be GLAD they are doing it, not crying about it.
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