What’s That Got to Do With the Price of Oil in China?
Yesterday the price of oil on world markets closed at $123 a barrel, just where it was at the beginning of May this year. Oil economist James Hamilton has an excellent post that suggests that the fundamentals of supply and demand may well be the major factors that have caused oil prices to spike this summer.
Now, how could it be that China is burning 860,000 b/d more than it used to, but no more is being produced? Well, it could be that there are errors in the consumption or production numbers, and both will likely be revised. Or it could be that we’re drawing down global inventories. But the most natural inference is that somebody else in the world must have been persuaded to reduce their consumption of oil between 2005 and 2007 to free the barrels now being used in China. And indeed, according to preliminary EIA estimates, petroleum consumption in the U.S., Japan, and those countries in Europe for which data are now available fell by 760,000 b/d between 2005 and 2007.
Read the whole thing. Lots of pretty graphs (like the one of oil prices at right which you can click on for a larger image).
The Chinese government subsidizes the price of gasoline in China to the tune of roughly 50%. I’m not opposed either to increasing our domestic oil production or reducing our domestic oil consumption but, if we really want to bring down the price of oil in the near term, negotiating with the Chinese to have them trim their subsidies a bit should be a high priority item in the next administration. I’m betting it won’t be. What do you think?
A subsidy by the Chinese government is not a magic incantation. Someone has to pay for that subsidy. It may be Chinese tax payers (and I have no idea of their taxing schemes to know who that would be), it may be US consumers paying higher prices for Chinese goods or it may be the people supplying the oil (even though China is going after oil in places that the west morally isn’t to interested in looking, oil is so fungible I have trouble believing this is the case). It could be that the ‘subsidy’ is in not taxing the gas as much as the US or Europe does (in which case I would argue it is not a subsidy).
If the US decreed $2 gas, subsidized the oil companies to achieve this and then paid for it by higher taxes or deficit spending (aka borrowing the money), would the price of gas really be halved? Or would we have just shifted the cost from a direct cost where individual actions can compensate for the increased price by adjusting usage to an indirect cost where individual action becomes almost meaningless?
So when you advocate for China to remove the subsidy (in what ever form that is), what exactly are you expecting to happen?
The subsidy is a direct subsidy. The Chinese government sells gasoline to Chinese consumers at a price below the world price.
Who pays? China buys oil and gas at world prices and sells it to its people at lower prices so whoever puts money into the Chinese government’s treasury pays: the Chinese people, Chinese companies, ultimately U. S. and European consumers.
What I expect to happen is that the Chinese will respond to the price signals they’re currently largely insulated from (just as we do).
Dude, fossil fuels are not renewable. They will eventually run out.
The main thing we should be doing is shifting to a post-carbon economy.
Triumph,
Feel free to stop using fossil fuels any time you want to. Just don’t expect me to do so until we have valid choices.
\
Why is the right so frigging scared of the future? Look, we all use fossil fuels, all day every day. But we should all be working (furiously at this point) to move beyond them.
The whiny “don’t expect me to give up my SUV. Call me when you have a solution” line from the right does nothing to solve our country’s serious, perhaps grave energy problems.
No one is asking you to give up your car. But we need to get serious about this as a nation and develop bi-partisan political will to do so, or we will be screwed in 25 years, if not sooner, and the lifestyles we enjoy today will seem like the distant dream of a lost golden age.
Or is the deal that the GOP is in the bag for big energy interests and the future be damned?
Anjin san
Is it the right or the left that has been blocking nuclear power plants in this country? The left.
Is it the right or the left that has been blocking shale oil development in the US? The left.
Is it the right or the left that has been blocking off shore drilling in the US? The left.
Is it the right or the left that has been blocking ANWR drilling in the US? The left.
Texas, a state proudly on the right is going ahead with the countries largest wind power generation project while a leftist state like Massachusetts is blocking wind power (led by on of the far left senators Ted Kennedy).
As I see it, the left is the largest inhibitor to developing energy in the US. So don’t blame the right when it is the left that is keeping prices high at the pump and blocking the alternatives that would help gas prices today and provide energy for the future.
You are right, Pilot, if the Democrats continue to block drilling in places there actually is oil we will be screwed much sooner than 25 years. Pie in the sky future BS is just that, BS. There is no economical replacement for fossil fuels. Let alone all the other products obtained from oil. Tell you what, Pilot. Let us just wait until November to see who is right. Pelosi and Reid who are owned by the radical environmentalists or the Republicans who seem to have the publics best interest in mind. Your blaming Big Oil is incredibly stupid. Considering how much oil we use what to you want? Nationalized oil? Like Maxine Waters alluded to? If that is you aim, move to Hugo Chavez land. They already do that. This is the land of the free and the home of the brave, except for a few exception for folks like you Anjin.
Drill away, there just isnt enough to make a big difference, maybe three years worth in ANWR and offshore. Need a plan for after that. It is not something that can just be passed on like the national debt.
Steve
I know that Rush has already told you what you think, but lets interject a fact. GHB Bush signed an executive order in 1990 banning drilling on the Continental shelf. GW Bush took 7.5 years to take the very simple act of picking up his pen and rescinding it.
During those 2 decades, the Bush’s good friends, the Saudis raked in billions upon billions, all well the Bush drilling ban was in effect.
There is also a congressional component to the equation, but let us not forget that the GOP controlled congress for quite a few years.
Got any more good lies to tell?
http://www.bloomberg.com/apps/news?pid=20601087&sid=a362RHmsy71s&refer=worldwide
Let us also remember that the President was all too happy to block drilling off the Florida coast when it helped his brother politically:
WASHINGTON — With his brother, Gov. Jeb Bush, looking on, President Bush sealed a deal Wednesday to prevent further oil and gas drilling off the white sand beaches of the Florida Gulf Coast and in the cypress swamps near the Everglades.
The unexpected announcement would require the federal government to repurchase $235 million worth of oil and gas leasing rights in the Destin Dome area, about 25 miles south of Pensacola, and in three wildlife areas including Big Cypress National Preserve.
Jeb Bush acknowledged that the Oval Office announcement would boost his re-election campaign in Florida, the swing state in the 2000 presidential election and a tourism mecca where polls show 75 percent oppose offshore drilling.
Afterward, the clearly buoyed governor spoke to Florida reporters on a car phone and was not at all flustered by a suggestion that his brother George W. Bush was only mining environmental votes in Florida and oil contributions in Alaska, where the presi
dent supports drilling in the Arctic National Wildlife Refuge.
“I disagree with that, but you know what?” Jeb Bush said. “I don’t really care. How about that? I’m the governor of Florida and I am incredibly proud that this historic day has come.”
President Bush said Wednesday’s action “once again demonstrates that my administration will take seriously the views of local communities. The federal government should continue to work closely with states and local communities in solving issues that affect energy security, the economy and the environment.”
Jeb Bush and Interior Secretary Gale Norton told reporters after a brief meeting with the president that the actions will help preserve the Florida Panhandle’s pristine coastline.
“It just didn’t seem right that 25 miles off that coast there would be the possibility of drilling, and today that possibility no longer exists,” Bush said.
The governor called the agreement to also repurchase oil drilling rights near the Everglades “a win-win for our state as well.”
http://www.spokesmanreview.com/news-story.asp?date=053002&ID=s1156519
Well, in your case III, its a bit more like “The land of the free and the home of the stupid”
Anjin-san,
George W. Bush just rescinded that executive order. Pelosi and Reid won’t even bring the issue of off shore drilling up for debate. Sorry, it is the left blocking off shore drilling. Come on, try to keep up with current events.
And I notice you aren’t mentioning any of the other energy sources the left is blocking.
Steve,
US shale oil 2118 Billion barrels. Saudi oil reserves 266 billion. Still want to talk about only having 3 years of oil in the US?
7.5 years into his presidency. What took him so long? (giving the Saudis every chance to rake it in perhaps) And keep in mind it was his father, hardly a member of the left, who signed it in the first place. Also note that the GOP controlled congress between 1994 and 2006, yet the congressional ban remained in place all those years.
We have also seen how GW blocked drilling to bolster his brothers reelection chances.
I know little about oil shale. Nuclear technology has a long way to go to be viable. Or is your point that we should just build plants because we need them now, and screw the many future generations that will have to deal with the highly radioactive waste they produce?
So if it makes you feel better to whine about how its all the lefts fault, go for it. But it is clearly not true.
A bit of information on oil shale. Clearly, it is not as simple as “oil shale would solve all our problems if the libs stopped blocking it”.
Industry can use oil shale as a fuel for thermal power plants, burning it (like coal) to drive steam turbines; some of these plants employ the resulting heat for district heating of homes and businesses. Sizable oil shale-fired power plants occur in Estonia, which has an installed capacity of 2,967 megawatts (MW), Israel (12.5 MW), China (12 MW), and Germany (9.9 MW).[20][47]
In addition to its use as a fuel, oil shale may also serve in the production of specialty carbon fibers, adsorbent carbons, carbon black, phenols, resins, glues, tanning agents, mastic, road bitumen, cement, bricks, construction and decorative blocks, soil-additives, fertilizers, rock-wool insulation, glass, and pharmaceutical products.[35] However, oil shale use for production of these items remains small or only in its experimental stages.[6][2] Some oil shales yield sulfur, ammonia, alumina, soda ash, uranium, and nahcolite as shale-oil extraction byproducts. Between 1946 and 1952, a marine type of Dictyonema shale served for uranium production in Sillamäe, Estonia, and between 1950 and 1989 Sweden used alum shale for the same purposes.[6] Another of its uses has been as a substitute for natural gas, but as of 2008, producing shale gas as a natural gas substitute is not economically feasible.[48][49]
The oil derived from oil shale does not directly substitute for crude oil in all applications. It contains higher concentrations of olefins, oxygen, and nitrogen than conventional crude oil, as well as higher viscosities. By comparison with West Texas Intermediate, the benchmark standard for crude oil in the futures contract market, shale oil sulfur content ranges up to 9.5% by weight, where West Texas Intermediate’s sulfur content has a maximum of 0.42%.[50][51] The higher concentrations of these materials means that the oil must undergo considerable upgrading before serving as oil-refinery feedstock.[52] Shale oil does not contain the full range of hydrocarbons used in modern gasoline production, and could only be used to produce middle-distillates such as kerosene, jet fuel, and diesel fuel.[4] Worldwide demand for these middle distillates, however, has increased rapidly
This being said, this technology at least deserves a harder look. Drilling offshore, I oppose adamantly. Our generation has gone a pretty decent way towards killing the oceans. Even if we stopped doing so tomorrow, future generations will curse us for our greed, short-sightedness and stupidity.