Its economy is finally large enough to have important impacts on the world as a whole:
Posted by DeLong at May 14, 2004 03:46 PM | TrackBack | | Other weblogs commenting on this postChinese Oil Demand Puzzles Market By BHUSHAN BAHREE, Staff Reporter of THE WALL STREET JOURNAL, May 14, 2004
China's exploding demand for oil -- one factor that helped drive petroleum prices above $40 a barrel this week -- has put energy markets at increased risk of disruptive price spikes and crashes, according to a study by an influential forecasting group.... China's growing thirst for oil -- plus strong demand for gasoline in the U.S. and fears of supply disruptions in the Persian Gulf -- has driven oil prices to their highest levels since oil futures started trading on the New York Mercantile Exchange in 1983. The price for U.S. benchmark oil for June delivery settled at $41.08 Thursday, up 31 cents from Wednesday.
Iraq hasn't yet repaired a sabotaged pipeline feeding its two offshore oil-export terminals, missing a target set by the country's oil minister this week. The attack has cut Iraqi exports by 600,000 barrels a day, or almost a third.
Saudi Arabia, de-facto leader of the Organization of Petroleum Exporting Countries, is quietly asking ship brokers for extra tankers in the second half of next month to transport crude to the U.S., according to people in the Persian Gulf shipping business. The extra oil wouldn't reach American shores until late July. Still, the move reinforces the kingdom's call on OPEC this week to raise output quotas and echoes steps taken by Saudi Arabia in previous tight markets -- including just before the U.S.-led invasion of Iraq last year -- that helped damp prices....
China's leaders are trying to rein in the country's fast-growing economy... growth in oil demand could slow to about 7% in the second half this year from the estimated 13% growth of the first half.... The International Energy Agency, of Paris, however, forecasts that Chinese efforts to cool the economy won't significantly cut oil-demand growth. Much of the increase in Chinese oil demand is to fill a growing power shortfall by using individual diesel generators. That gap, the IEA said in its latest monthly report released this week, may take years to bridge. The IEA also notes that China's increasing need for transportation fuels is unlikely to reverse itself. According to the IEA, China accounted for one million barrels of the 1.8 million-barrel increase in daily oil use globally in the first quarter of this year compared with the year-earlier period.
Originally at http://online.wsj.com/article/0,,SB108448431588911131,00.html?mod=economy%5Flead%5Fstory%5Flsc
Finally we have something worth thinking about that isn't based upon venal stupidity. Definitely a breath of Spring.
Posted by: pt martin on May 14, 2004 06:44 PMAmerica sucks up much of the oil left unburned. It is like a very fat, obese man complaining about a starving man eating one quarter of the meal the fat bozo is eating.
We are pigs.
Posted by: Elaine Supkis on May 14, 2004 07:22 PMThis is why the US Army is in Iraq now instead of later. Oil companies look years ahead.
Posted by: Larry C. on May 15, 2004 03:40 AM"China stands up."
Aaaaawwwhh. Isn't that sweet? Another defining moment in the life of another one of the unplanned children of our not so private, not so cultured, not so classy "war" here on the home front.
Just in time, just what we needed to lift our spirits: A really big, really rich police state really walking softly with a really big stick...
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Asia's Stockpiles of Dollars Pose U.S. Economic Risks
By Tyler Marshall
Times Staff Writer
April 6, 2004
HONG KONG — A massive buildup of U.S. dollars held by Japan, China and other Asian countries is fueling increasing unease among analysts and policymakers, who fear it poses risks to the fragile American economic recovery and global financial stability.
Collectively, Asian countries hold foreign exchange reserves — mostly in dollars — valued at more than $2 trillion, nearly triple that of just seven years ago, according to the Asian Development Bank. Those dollar holdings continue to grow rapidly, with the Japanese and Chinese governments particularly heavy buyers.
Asian governments buy dollars because it helps boost their export-led economies. Snapping them up keeps the greenback's value high and the value of regional currencies low, giving Asian countries a vital competitive edge in foreign markets.
Though this strategy makes a Chinese-made toy or a Japanese TV set cheaper for Americans and other global consumers, it has serious side effects. The dollars that Asian countries rake in as payments for those exports further boost their already bloated reserves while the record U.S. trade deficit grows even larger.
But that's not all. Asia's dollar purchases also effectively finance the huge and growing U.S. budget deficit...
http://www.sdcia.com/msgboard.mv?parm_func=showmsg+parm_msgnum=1003491
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And just what the doctor ordered to cure what ails the sophistic ship powerful of nation-state drunken fools who produced it too:
Thank you, Ronald Reagan.
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"...Capital, Interest Groups, and the Eclipse of Social Policy"
http://www.sociology.org/content/vol003.004/thomas.html
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Thank you, Dick Cheney.
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"TAXING"
http://newyorker.com/talk/content/?040126ta_talk_cassidy
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Thank you, Transnationally Corporate, WTO approved, Wall Street walkers everywhere.
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"Notes on the U.S. Trade and Balance of Payments Deficits"
http://www.levy.org/docs/stratan/stratan.html
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But MOST of all, thank YOU, Mr. Chairman Alan ('Daddy Warbucks') Greenspan.
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"US dollar hegemony has got to go"
http://www.atimes.com/global-econ/DD11Dj01.html
("BUSH'S DEEP REASONS FOR WAR ON IRAQ: OIL, PETRODOLLARS, AND THE OPEC EURO QUESTION")
http://ist-socrates.berkeley.edu/~pdscott/iraq.html
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Seriously though, one shudders to think of the big, really big, depressing problems the REST of us earthlings might actually be focusing on today if the aforementioned fraternity of "fundamentally" sound fun-loving "good fellas" hadn't come along to "divert" us with their wedgy, WMDish, strict constructionist, Southern strategies and such...
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"THE END OF CHEAP OIL"
March 1998
http://dieoff.org/page140.htm
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Power to the people
April 29, 2001
http://observer.guardian.co.uk/global/story/0,10786,524245,00.html
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"America Can Persuade Israel to Make a Just Peace"
April 21, 2002
http://www.truthout.org/docs_02/04.22B.Jimmy.Carter.htm
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Last of the Big Time Spenders: U.S. Military Budget Still the World's Largest, and Growing
March 19, 2003
http://www.cdi.org/program/document.cfm?DocumentID=1040&StartRow=1&ListRows=10&appendURL=&Orderby=D.DateLastUpdated&ProgramID=15&from_page=index.cfm
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Religious zealotry and the crisis of American democracy
29 - 7 - 2003
http://www.opendemocracy.com/debates/article-3-77-1394.jsp
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U.S. Budget Deficit Threatens World Economy, IMF Warns
Thursday, January 8, 2004
http://www.unwire.org/UNWire/20040108/449_11858.asp
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"The Earth's life-support system is in peril"
January 19, 2004
http://www.iht.com/articles/125563.html
Posted by: Mike on May 15, 2004 05:14 AMMaybe you ought to look at US real oil imports data.
Reflecting the recession and draw down in oil inventories because oil companies were afraid of
being stuck with high cost inventories when oil prices fell US real oil imports have acted very unusual over the past few years.
From 2000 to early 2003 real US petroleum imports -- both crude and refined products --
stagnated. They popped in early 2003 but quickly fell back so that early this year real US Petroleum imports were at the same level as in 2000. For essentially 3 years US real petroleum imports have not grow. So by early this year they were only about 85% of trend -- a 6% growth trend since 1990.
Now that inventories are at rock bottom levels inventories are going to have to be rebuilt and
that means petroleum imports should rebound sharply -- in March real petroleum imports jumped 7.8% from Feb.
But US petroleum imports are essentially the demand curve from the perspective of OPEC.
This data imples that we have seen the run up in demand and prices for oil while US demand for foreign oil was flat. But now we are starting to see a surge in US imports --demand. This implies that the normal seasonal weakness in demand for OPEC oil is not showing up this year.
It also means that just for the system to remain flat, OPEC will have to significantly expand output just to meet the surge in US demand that stems from a need to rebuild inventories and meet stable demand growth.
My experience is that most oil analyst are very good on the supply side of the equation but they are very poor at forecasting demand. Most essentially plug in 1%-2% trend growth to estimate demand and ignore factors that cause demand to fluctuate. This is why they are wrong on prices so frequently.
Posted by: spe on May 15, 2004 06:11 AMBe aware that the Chinese are (purposefully) slowing down their economy.
If they manage to take a 9+% GDP down to 7.5% or so, the change in demand on the margins should be enough to impact crude prices dramatically.
Posted by: Barry Ritholtz on May 15, 2004 06:42 AMThis from the UAE
"Over the past 30 years the world has been through several major oil shocks, or oil crises in which the cost of a barrel of oil suddenly shot up causing consumer and asset price inflation, higher interest rates, and then an economic downturn or outright recession.
Is that where we are suddenly heading in this optimistic summer of 2004 when all the world's economies are growing again after a major post-Millennium slowdown?
Certainly capital markets voted with their feet last week, and investors headed to the exit doors. But this may just a sign of things to come.
One statement earlier last week from Opec sent a chill down the spine of market watchers. This was a declaration from the oil cartels' president that there was nothing Opec could do about rising prices in current circumstances.
For those who respect the Saudi Arabians as the great swing producers of the oil market this is very sobering. If Opec can not release enough oil to satisfy the thirst of an expanding world economy led by China and perhaps India, then who can?
Russia? We got the answer on Friday last week. The Russians are up to 9.3 million barrels per day, and can add no more supply. They are at their physical limit.
Add in very real threats of supply disruption in the Middle East – and we saw Iraq exports dip by 500,000 barrels per day last week due to another sabotage incident, albeit just for a few days – and you have a very precarious supply and demand equation.
Now what can happen to reduce demand to meet available supply? Answer: higher oil prices.
Oil prices will therefore rise to such a level that the global economy contracts and the supply and demand equation is in balance. The mechanism involved in depressing global oil demand is consumer and asset price inflation caused by high oil prices which will necessitate higher interest rates.
In the interim period the question of how high oil prices go actually depends on how long the Federal Reserve keeps interest rates at their present ridiculously low levels. It was, after all, excessively low interest rates that sent demand for oil to present unsustainable levels in the first place.
Given that this is a US Presidential election year, and the Fed has no desire to dampen this year's economic success story, we might see oil prices surge a lot higher before the inevitable medicine of high interest rates is taken. And the higher oil prices rise the more aggressive those interest rate rises will have to be.
On the other hand, in order for the oil producers to invest in new capacity to meet rising real global demand for oil then we will probably continue to see oil prices well above the depressed levels of the 1990s. Otherwise, there will just be another supply and demand crunch, and another business slowdown or recession.
So higher oil prices are probably here to stay, and today's shock headline might be tomorrow's planning baseline. In the meantime, oil prices could double this summer".
Last year, it was China, not the US, which decided to set fuel economy standards on new cars and light trucks. They will require new cars, vans and sport utility vehicles to get two miles a gallon of fuel more in 2005 than the average required in US, and five miles more in 2008.
Also, while Chinese demand for oil is rising much faster than anywhere else, it's still only about 6 million barrels per day, compared with about 20 mbd for the US (On a per capita basis, of course, the discrepancy is about 1:16). I realize price is affected by marginal demand, but we really have no grounds for complaining about China's relatively modest consumption and far more responsible attitudes toward petroleum supply.
Posted by: Chella R. on May 15, 2004 07:45 AMI just read via the People's Daily that while China's GDP is No.7, its GDP per capita is No.110. That was a real surprise. They're a lot further behind than I thought.
http://english.people.com.cn/200405/19/eng20040519_143761.html
Posted by: mitch on May 19, 2004 06:13 PMOnline Casino Directory
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