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Page added on February 11, 2016
Is China Hitting Peak Oil?
China pumps more than 4 million barrels of oil a day (only Saudi Arabia, the United States, Russia, and on a good day Canada produce more), but output is expected to decline this year as the country’s oil fields mature and operations become more expensive. The WSJ reports:
China is among the world’s top five oil producers, but its fields are growing depleted and are increasingly expensive to pump. The country’s leading companies are choosing to leave more of their oil in the ground and some analysts now say Chinese oil output may have peaked. […]
As China’s production starts to decline, demand for oil from overseas should remain firm, which would be good news for prices, which have been languishing near multiyear lows amid a global supply glut and weak demand in the rest of the world. […]
This news will be welcomed by oil producers elsewhere, who will be crossing their fingers that China’s tapering output will help offset the global crude glut and help bring prices back up.
But this decline has strategic as well as market implications. As China’s domestic oil production becomes more expensive, it will be forced to produce less at home and import more from abroad. The more dependent China is on foreign oil, the less likely it is to think that war with the United States is a good idea. Without the oil that comes from overseas, across waters where the U.S. Navy is supreme, China’s economy would grind to a halt.This poses a problem that China will have a hard time solving. Coal is abundant in China, but the environmental consequences of reliance on that energy source are devastating. Renewables are part of the solution, but won’t make the kind of difference China needs. Fracking might someday unleash new supplies of oil and gas, but China’s geology and geography are unfavorable—much of its reserves are in geological formations that remain hard to tap, and many of the most promising fields are in arid areas where water-intensive fracking methods are difficult and expensive.With the Middle East mess getting worse all the time, China faces energy insecurity apart from the threat of conflict with the United States. Expect this to be a continued focus of Chinese foreign and economic policy. China’s dependence on foreign oil is one of the strongest pillars of world peace.
16 Comments on "Is China Hitting Peak Oil?"
Truth Has A Liberal Bias on Thu, 11th Feb 2016 7:05 pm
“The more dependent China is on foreign oil, the less likely it is to think that war with the United States is a good idea.”
That’s not necessarily true. Nevertheless China can easily outmaneuver USA.
Plantagenet on Thu, 11th Feb 2016 7:16 pm
China is making enormous territorial claims on areas of the westernmost Pacific Ocean. Thats why they are building military bases on top of artificial islands on top of several coral reefs. China is already drilling for oil in some of their new offshore territories.
The US periodically sends a naval vessel by the new Chinese offshore bases or a US Air Force plane flies over them. The good news is that China hasn’t started shooting at the US military yet.
Truth Has A Liberal Bias on Thu, 11th Feb 2016 7:30 pm
“Without the oil that comes from overseas, across waters where the U.S. Navy is supreme, China’s economy would grind to a halt.”
Whilst the US remains a preeminent power they are no longer dominant. Russia and Iran have together successfully opposed US policy in Syria. If Russia, China and Iran cooperated they could easily defeat US forces in battle.
Truth Has A Liberal Bias on Thu, 11th Feb 2016 7:33 pm
“With the Middle East mess getting worse all the time,”
Much of this development plays to China’s favor as Gulf OPEC states come to rely on security support from China and not USA.
This article is fucking retarded. I bet most yanks just eat this shit up. It’s not hard to see why USA is on the way down. They’re fucking retards.
GregT on Thu, 11th Feb 2016 9:25 pm
“China is making enormous territorial claims on areas of the westernmost Pacific Ocean.”
I believe that the area you are referring to is normally called the South China Sea Planter.
makati1 on Thu, 11th Feb 2016 9:44 pm
China has no interest in a war with anyone. That China wants war with the Us is pure propaganda bullshit. Nor does Russia want a war. The US does though and is trying desperately to start one. They still may believe that they can win, but … they will not. Unless being a dead country covered with radioactive glass is considered ‘winning’.
As for oil, the Chinese are not worried. They have numerous deals all over the world for oil. Cheap oil. And they are building pipelines to new sources to avoid the ability of the US to block sea trade. The Empire is playing ‘catch up’ with both China and Russia these days and falling behind.
makati1 on Thu, 11th Feb 2016 9:47 pm
Planter, the South China Sea has been Chinese owned for hundreds of years. It is only the US that is making a big deal out of it to justify their aggression against China. But China is not backing down and the Empire is getting frustrated. Sailing their navy inside the 12c mile limits without permission is aggression big time. China would have the legal right, by international law, to blow them out of the water. Perhaps, someday, they will. Until then, pure bluster and bullying on the part of the Americans.
makati1 on Thu, 11th Feb 2016 9:48 pm
Truth, you got it in one! ^_^
Boat on Thu, 11th Feb 2016 10:38 pm
mak,
You are as map challenged as you are reading charts. Those islands are no where near China. The Philippines, Vietnam and Indonesia should be arguing about them if anybody should.
Why would you support China over your own country.
Does that mean any nation can pick a shallow area, build an island and then claim 200 miles around it?
Apneaman on Thu, 11th Feb 2016 11:59 pm
Boat, did your mom drink heavily while she was pregnant with you? You’re just pissed because China pulled a tricky end around and has done something that the US no longer has the capabilities to manage or even imagine. Can’t even fix the fucking potholes or keep the bridges maintained, let alone build an island in the middle of the ocean. Good at blowing wimpy defenseless brown people up though – still #1 at that.
http://thediplomat.com/2016/02/taiwans-south-china-sea-dilemma/
Dooma on Fri, 12th Feb 2016 4:57 am
” across waters where the U.S. Navy is supreme”
That piece of chest-beating patriotic propaganda has a used-by date that is getting closer by the day.
Several people have mentioned the “artificial islands” a.k.a bases. We also must remember the five aircraft carriers that are currently under construction. And they will be filled with fighter jets that actually work..
Rodster on Fri, 12th Feb 2016 10:27 am
China needs to worry more about clean drinking water and peak pollution more than peak oil at this point.
makati1 on Fri, 12th Feb 2016 6:14 pm
Rodster, they are all related. The Us needs to be thinking about clean drinking water and not war. Or don’t you read anything but Imperial News?
makati1 on Fri, 12th Feb 2016 6:36 pm
Boat, the Philippines is 7,007 islands running north to south for about 1,000 miles. Does that mean they they are not ALL in the Philippines?
China has the longest history of controlling the South China Sea and those atolls and reefs. That gives them the right to them now. The Chinese have 4,000+ years of recorded history and more than 100,000+ years as a people living in what is now China.
The Filipino nation goes back to a group of tribes from the Asian continent. Archaeological evidence supports the beginning of the Philippine people at least 60,000 years ago.
The ‘melting pot’ Americans have no ‘history’. The real Americans have mostly been killed or sidelined by the pillaging Europeans.
The US has no ‘historic’ lands to claim. Only what they stole from some other peoples over the last 500 years. No historical ‘rights’ to speak of. When you live in a glass house, you don’t throw stones. The US hasn’t learned that … yet.
shooi dan tom on Fri, 12th Feb 2016 6:40 pm
Many writers are mentioning South China Sea islands are far from China. How far are Canada, Australia, Palestine, Hawaii,
Alaska, S America, Falkland Islands, Guam,
New Zealand, America…..from Europe???
Yet the Europeans took all of them. China is just building defense it its front yard.
Davy on Sun, 14th Feb 2016 8:06 am
Neil Howe on China:
“The Big Picture”
http://www.mauldineconomics.com/outsidethebox/the-big-picture
“BP: What are their options? NH:Their first (and worst) option would be to stay the current course, losing reserves and credibility at a growing rate while failing to stop the currency decline. Before the year is out, they will have to enact a major devaluation anyway and do it from a position of weakness. Their second option would be a resolute defense of the CNY near its current level with much stricter capital controls and jacked-up interest rates. But capital will still seep out—and to prevent higher interest rates from killing the economy, they would have to switch entirely to fiscal stimulus. I just think it’s too late for this. Their third option would be to bite the bullet up front and enact a large devaluation (40% or more) that the PBOC is certain it could defend and then accompany that by further relaxing of capital controls. It is the best option, but since it requires boldness and political courage it is probably not the one Beijing will choose.”
“In a brilliant interview I highly recommend, strategic trader Mark Hart summarizes both the problem and the options. His bottom line is this: We are very likely to see a large CNY devaluation in 2016—regardless of whether China’s leadership does this preemptively or whether they are dragged to it unwillingly. And that devaluation will come with real risks. Global markets may sink and cause investors to flee other emerging markets. Other economies (especially in Southeast Asia) may retaliate with their own devaluations, threatening “currency wars.” Global leaders will react with heated and nationalist finger pointing. To avoid losing face, leaders in Beijing may blame others (the Fed, the EU, Shinzo Abe) for forcing them into this decision. It won’t be a pretty picture.”