May 22, 2008

Peak Oil? Blame China

The latest wrong thinking meme in news reporting is to (once again) blame China for the run up in oil prices. In fairness some mainstream media outlets (CBS, PBS) are following the surge in oil prices to NYMEX and placing blame where it belongs - on investors and speculators in oil futures. George Soros has gone so far as to say oil prices are the latest global investment bubble. Of course, Soros has long distrusted oil markets.

Yes, demand in China has increased greater than predicted for the last four years and shows little sign of slowing. The IEA forecasted last year that demand in China would raise to 10 million barrels a day as soon as 2012. But that figure is less than half what the United States currently consumes! And demand is coming from everywhere. Car sales are up over 60% year on year so far in 2008 in Ukraine, as just one example. From Latin America to the states of the Indian subcontinent, millions of people are realizing the dream of the American lifestyle centered around the family car. In many ways the start of the 21st Century is much like the turn of the 20th only this time car culture is reaching new markets all over the world.

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