China's Shrunken Thirst for Oil

[Strelnikov_]

Guess planned (command?) economies do not have to wait for an energy bill to reign in energy consumption.

Business Week
July 19, 2005

http://www.businessweek.com/bwdaily/dnflash/jul2005/nf20050719_7471_db016.htm

Even China's enormous thirst for energy appears to have its limits. Evidence has mounted across Asia in recent days that oil prices have finally grown too rich for China, which accounted for more than 40% of total growth in world demand in 2004 and is expected to feed even more explosive demand this year. But on July 18, OPEC cut 150,000 barrels a day from its forecast for oil-demand growth this year, citing China's weakening appetite for crude.

. . .

Fundamentally, sources say the reluctance of China's government to allow significant increases for domestic "guidance prices" for important retail products like diesel and gasoline has pushed the country's state-owned and independent refiners to the breaking point. The disparity between high Asian benchmark crude-oil prices and closely controlled prices for the products that are refined from that crude oil have forced significant cuts in production runs at refineries and have eaten into Chinese crude demand.

Moreover, artificially low domestic retail prices have also turned China into an exporter of products that are usually in tight supply. Its major trading companies, China Oil and Unipec, have been exporting significant extra volumes of "gasoil" (heating oil and diesel fuel) in recent weeks, a product that China ordinarily imports in volume. In other refined-product markets where China normally falls short on domestic production, importers have stopped buying foreign products altogether.

Meanwhile, domestic resale values in China for other hydrocarbons -- fuel oil, propane, and butane -- have run below import prices for large chunks of 2005, a phenomenon referred to in China as dao gua. During spells of dao gua, fuel oil and liquefied petroleum gas importers normally put product into stock. Stocks are now so high in some ports that importers have stopped buying altogether for weeks on end -- causing a second major dent in China's apparent oil demand, on top of diminished crude-oil runs.

[phantom power]

1. They may be draconian, but there are advantages.

While we waste precious years arguing about whether there is even a problem, they are implementing solutions, on the national scale required to actually have an effect.

[Old and In the Way]

2. Apparently, none of the Communist leadership comes from the oil industry.

If there is one place where we should have a federal governmental role , it's with a national energy strategy. We know that the "free market" approach to energy deregulation is a joke. Industry will never drive altruistic solutions to energy conservation, environment, and alternative energy. That's why we need a strong federal government to drive the vision. As long as we have oil executives in control of our government, we'll never be weaned on our foreign oil independence. People need to understand the interests of Big Oil to do correlate to the interests of the United States.

[StrafingMoose]

3. Well said.

[ThomWV]

4. Hold On Just A Damned Minute Here

Look closer at what is actually being reported. No one has said that China's demand next month or next quarter or next year will be higher or lower than it has in the past.

What was actually reported was that Chineese purchases were overestimated during the first quarter - that the demand that drove up prices was never really there in the first fucking place - by roughly 150,000 barrels per day.

Look closley and what you come to realize is this is just part of the energy screwing we have been getting.
It was the over reporting of Chineeses demand that drove up prices, not the actual oil consumed. For that reason world wide reserves are growing even as we speak.

[phantom power]

5. Interesting point. Can't assume OPEC didn't cook their initial numbers.