The Peak Oil Crisis: Thinking About China

Like everyone else, Beijing is about to fall victim to rapidly increasing oil prices, and eventually, shortages brought about by peaking world oil production. The government clearly recognizes this and has embarked on multiple programs to increase the efficiency of its energy use, increase production of renewable energy, and to buy up at top dollar as much foreign coal, oil and natural gas production as anybody is willing to sell them. This will in turn prove to be a major problem for the oil importing OECD countries that will see their sources of foreign oil disappear more quickly than anticipated.

For now the Chinese economic juggernaut appears ready to keep moving along right into the age of oil depletion. While the country has social and environmental issues none appear to be a hindrance to continued rapid economic development for the immediate future. With massive reserves of foreign exchange, Beijing should be in best position of any major oil importers to weather at least the initial stages of much higher oil prices.

The next few years are likely to be critical for should China keep increasing its imports of oil and even coal at anywhere close to their current rates of increase, major price spikes in the world’s oil markets seem inevitable. The U.S. and OECD may not do too well economically in the next few years, but their oil and coal consumption are unlikely to take more than minor dips. These dips in consumption are unlikely to be enough to offset increasing oil consumption in Asia and the oil exporting nations.

FCNP