Special Reports
How Will Chinaís Energy Consumption Effect the West?

By mark Marris
September 22, 2006

You canít turn on the TV or open a magazine these days without
reading about the rise of China and how they will be the next economic
superpower within the next few decades.

China has 1.3 billion people living within its borders and an economy growing at
over 10% per year. For energy consumption to keep pace with economic growth
China will have to harness every fuel source available including renewable
energy and nuclear power. There is not enough gas and oil in the world to
satisfy China, not with itís neighbor India with 1 billion people also having a
huge demand for the same resources. An increase in the rise in personal car
ownership alone could mean an extra billion cars on the road worldwide within
the next 10 years. The majority of these will be in China and India.

While the West is considered developed and is growing slowly, the Chinese
economy is still growing fast and is expanding the range of products and
services that it offers to the West. Some of these products that are
manufactured such as plastics and chemicals will require even more oil. As the
Chinese economy expands then so will the demand. As people move from urban to
rural areas, the use and availability of electricity and gas in the home will
also increase causing further strain on its reserves.

This growing economy needs the energy to drive this growth, there is only a
limited amount of fossil fuels in the world and the oil and gas will not last
for ever. This is leading to increasing competing demands for a countries
resource, be that in Latin America or Africa. It also means that everybody buys
oil from countries that have appalling human rights issues. If America stops
buying oil from Sudan because it is persecuting its citizensÖ.China steps in to
buy the oil and vice versa in countless countries around the world. Until
recently, Chinese companies seemed most comfortable operating in locations not
dominated by the major oil companies often owned by UK or USA companies. This
means that countries like Angola and Iran have partnerships and joint ventures
with the Chinese. For example, over half of Chinese overseas oil production
currently comes from Sudan. In 2005 the Chinese wanted to buy a USA oil company
but congress blocked this on the basis that national energy security was at
stake. There is a little irony in that USA companies expect to buy energy
companies all over the word, but if a key competitor wants to buy one of theirs
and is even offering a higher price then the deal is blocked.

Nobody can argue that China now plays a key role in the supply and demand of
many global commodity markets including steel, cement, and oil. This need for
resources combined with the bags of cash from its economic growth means that
China can afford to buy any oil field and rights anywhere in the world. A
position that only the USA held in the past.

Some argue that the allied forces only went to war in Iraq to get their hands on
the oil, time will tell if this true as oil production is currently lower than
when Saddam was in power due to sabotage and security problems. Will the next
war have oil as its stated aim and not Weapons of Mass Destruction?


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