Oil trade: China sets the trend
The projection initially came from Edinburgh-based energy consultancy Wood Mackenzie.
It said back in August that China is expected to surpass the US as the world’s top oil importer in four years’ time.
It went on to say that by 2020 China will be spending some $500 billion to cover its oil import bill as it is destined to import 9.2 million barrels per day, while the highest oil import bill the US paid stood at $335 billion.
In seven years, Washington is slated to pay only $160 billion for its much reduced foreign oil imports.
However, the US Energy Information Administration (EIA) recently came out with a scoop saying that China already surpassed the US in its oil imports in September and that, according to its data, the trend is likely to continue next year, which puts China on the top rank among world oil importers.
The Chinese were quick to react by describing the EIA report as ‘overrated.’
It also said in a detailed report released by the official news agency Xinhua that China’s September oil imports are higher for a variety of reasons and that a monthly development should not be taken to represent an annual trend.
It attributed the surge in September oil imports to what it called seasonal reasons, namely that the Chinese economy has registered a growth of 7.5 percent during the second quarter while that of the US grew only by 2.5 percent.
Moreover, sales of cars amounted to 16 million units because of expansion in urbanization and the middle class, which is a 12.7 percent increase on car sales compared to a year earlier.
China has surpassed the US in car sales since 2009.
The Chinese still think that they lag behind the US in oil imports.
They cite that Chinese oil imports stood at 210 million tons during the first nine months of this year against 304 million tons for the US.
They say it is hard to expect a gap in the range of 100 million tons could be closed in the remaining period.
Moreover, for the whole of last year the US oil imports amounted to 425 million tons, which exceeded by more than 150 million ton oil imported by China.
Arguments aside, it is clear that the Chinese are closing the gap, that they are on their way to occupy the rank of the world top oil importer this year, next year or in 2020.
The trend is already there and at best it is simply a matter of time.
Still the question to ask is what is the impact of such a development on oil producing countries.
Markets always witness newcomers and the oil market will not be an exception.
After all, both the US and China are not just importers. They are members of the ‘superpower club’ and their engagement has political, economic and strategic ramifications.
And that is why Washington got involved in the region even at a time when it was meeting its energy needs from its domestic production.
Even in the peak of 1973 Arab oil embargo, the percentage of US oil imports from the region was less than what its allies in Europe and Japan were importing.
Though successive US administrations since Richard Nixon continued to raise the issue of achieving energy independence, it was only during the past five years that with the fracturing technology a difference is being felt.
Unlike the late 1970s and early 1980s when supplies from non-conventional places like Alaska and North Sea started to hit world markets because high oil prices made prospecting for oil in these places commercially viable, it is a different story now.
It is new technology that is making the difference releasing millions of barrels of oil and gas supplies strapped in rocks.
It is not yet clear how long such a trend will be sustained or whether it can be exported elsewhere.
As it has been rightly said, the Stone Age did not end because of lack of stones but because of new developments.
This new development poses a challenge that needs to be met.
The same EIA report spoke of an expected increase in demand by one million bpd this year, rising to 1.2 million next year, but it noted that almost all the new demand will be consumed by China, the Middle East and Central America.
Another challenge is tackling the issue of rising domestic consumption in producing countries.
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