Think about this ...

             China's demand for oil abates

   Yes, that juggernaut of growing domestic industry that supplies seemingly everything for sale in WalMart is suddenly using less oil. Hmmm ... why would this be? Most people are saying 'China's industry is slowing' or 'China's intent on using more coal'. Welp, I got news for you. Over the last 5 years at least, China has been buying more oil on the open market than it uses. WHAT? you ask. That's right, China has been BUYING almost 20% more oil than it uses. There are several reasons why this is. First, China is as aware as anyone that there is a war in the MIddle East (where the oil is) and it's likely that the United States will lose the resolve to finish what they started, much less WIN. That would make oil go up in price don't you think? Second, China sees that the rest of the Third World is fast becoming a major competitor for China's export markets, and thusly, needs more oil. That would make oil go up in price don't you think? Third, the United States doesn't seem as though it is interested in curtailing consumption nor developing new sources of oil. That won't make the price of oil go down will it? Fourth, assuming what I have stated so far is true, China is in a bad spot vis a vis oil. They need it, they will need more of it and the price can only go up in the long run. What's a country to do? I'll tell you. For the last 5 years or so, China has been buying excess oil at acceptable prices and stockpiling it. Now, the CIA, will say 'oh they don't have the tank capacity' to 'store that much oil'. Bullshit, where do WE KEEP OUR RESERVES? Hmmm? That's right, in old salt mines. China has its share of old mines, salt and otherwise. They have been filling those mines up. And now they are near full.

   Guess what? China can endure a little say ... oil shortage. Like the one that will surely happen when we embargo their ass for invading Taiwan. And the one that would arise if China decided to go after the oil fields in the South China Sea that theoretically belong to Vietnam. Remember Vietnam? Yup, they got oil. Lots and lots of oil. Pretty handy for China and pretty damned difficult for us to do anything about huh? I won't mention that China has been building submarines as fast as we have been building Hummers. 

   And just two other thoughts. One, I KNOW you have heard about the recent offer for Unocal. The lion's share of Unocal's oil is in Indonesia. Just a hop, skip and jump from China. Two, by buying all that oil, China got a bargain AND put a steady pressure on our economy. Just enough to keep us happy, but not enough to let us really grow. I won't mention that China has steadfastly insisted on an arbitrary connection between their currency and the dollar. Which of course makes their stuff cheaper than it is.

          Goes without saying that our Armed Forces are a bit busy of late.

   What does it all mean? I am glad you asked. Expect China to make a move on Taiwan very soon. Expect China to make a move on the oil fields in the South China Sea. Don't expect China to do a damned thing about North Korea ... except laugh.

                                                   Insert as needed

   

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   From China, some relief on oil demand

By KEITH BRADSHER

PARIS, July 13 - A sudden and mysterious drop in China's oil consumption helped to push down the International Energy Agency's estimate on Wednesday of global demand for this year.

After growing 11 percent in 2003 and 15.4 percent last year, China's overall oil use declined 1 percent in the second quarter from the comparable quarter a year earlier, the agency said.

The drop is the latest in a series of unclear and often conflicting indications about whether the Chinese economy is still growing strongly. Top officials of the agency said in interviews they believed that the decline was temporary and that they expected Chinese demand to rebound in the second half of the year, but added that world oil prices could take a heavy blow if Chinese use did not increase.

The International Energy Agency, supported by the governments of the world's leading consuming nations, has recently become known for warning that the world does not have enough oil and calling for the Organization of the Petroleum Exporting Countries to push its member countries to increase their output. But William C. Ramsay, the agency's deputy executive director, said Wednesday that there were signs that worldwide production capacity was starting to move ahead of demand for the year, and he expressed surprise that oil prices had nonetheless stayed high.

"There are not the conditions out there right now that should lead to these kinds of prices," he said in an interview in his office here.

The international oil market has gotten out of line with the availability of oil, he said, adding: "It gets in one of these bullish moods and it has to be dynamited out of it. The fundamentals are not disquieting."

While many traders have expressed concern about China's announcement a week ago that it was close to completing the first of three oil tank farms for a strategic reserve, Mr. Ramsay said he doubted that Chinese officials would opt to fill the reserve quickly as long as oil remained around $60 a barrel. [In New York on Wednesday, oil for August delivery declined 61 cents, settling at $60.01 a barrel.]

China's strong demand for energy has helped push Cnooc, one of its leading oil companies, to make an $18.5 billion proposal to acquire Unocal of California.

Officials of the International Energy Agency said there were four possible explanations for China's drop in oil demand in the second quarter, the most probable being that this was a temporary decrease. The most likely cause, said Fatih Birol, the agency's chief economist and head of economic analysis, was that China had not been allowing the domestic price of electricity and many refined products, like gasoline and diesel fuel, to rise nearly as quickly as world prices. This has caused power-generating concerns and service stations to sell less electricity, and less gasoline and diesel fuel, so as to limit their losses.

Many Chinese power stations have stopped burning fuel oil to produce electricity because the prices they are allowed to charge per kilowatt are not high enough to cover the cost of importing fuel. Chinese refiners have been selling part of their output overseas at higher prices than they can get in the highly regulated domestic market - where gasoline, for example, now sells for $1.63 a gallon.

China's consumption of fuel, a portion of overall oil consumption, plunged 19 percent in the second quarter from a year earlier, said Jeff Brown, an oil-demand analyst here, while growth in refined fuel consumption slowed to a crawl.

Mr. Birol said that artificial energy shortages caused by distorted prices were the most likely basis for the curtailed availability of fuel, especially diesel.

But while diesel-fuel shortages and lines of trucks at empty service stations were a visible problem in China in April, they were not evident during trips over the last three weeks through southern China and to Beijing, and there has been little talk of continuing shortages in news media on the mainland or in Hong Kong.

When told this, Mr. Birol said there had been a vigorous debate in the last two days within the International Energy Agency over how to explain the decline in Chinese consumption, and he acknowledged that other, longer-term explanations were possible.

These include the possibility that the overall Chinese economy is starting to slow, that China is generating more of its electricity from coal instead of oil, and that China is improving energy conservation in response to high prices.

Economic statistics have been contradictory. Exports are still growing rapidly. But energy-intensive production of steel, cement and other construction material has started to slow as the government cracked down on real estate speculation.

In the last year, China has considerably expanded the production capacity of its coal mines and, just as important, the capacity of its railroad system to haul coal to markets. It has also exhorted businesses and households to use less energy, through steps like setting thermostats higher so air-conditioning systems do not have to work as hard.

...NYT

Comments

[Macker]

Eh? What was that about a Greater East Asia Co-Prosperity Sphere? Thought so....

[Tannenberg]

I've said this elsewhere and I'll say it again. At this moment, the Dragon's position is analogous to that of Imperial Japan in the late 1930's.

They can be counted on the take Imperial Japan's road, and lust for Indonesian oil will be the precipitating factor.

And don't rule out another Pearl Harbor.

[vilmar]

Pearl Harbor? OK. So let's just nuke them now and stop the war before it begins? Oh, sorry, putting on too much of a war-monger face today.

Come on, you know it. It's a great idea. And Cheney/Bush/Halliburton can profit. How great is that?

For those in Rio Linda:

[Steel Turman]

...The Chinese are duplicating the entire steel industry as it exists in all of Canada over the last 70 years every few months. They have barely started to develope the interior of their country...

...THAT is from my brother who lives AND dwells at the Center of the Universe. I see Drudge has a headline re this subject too. China is going to be a BIG problem very SOON.

[TINA]

How very thoughty of you.I'll have more to say after I get over the flu.
Tina

[Steel Turman]

Tina ...

Sorry to hear that. Get better quick.