Gas Prices and China - Another Lie

[ThomWV]

For the last week the news has told me time and time again that the drastic jump in oil prices is the result of increased demand by the Chinese. Who am I to doubt it?

So this morning I thought I should just see how the numbers compared to the claim. As it turns out the US uses about 28 times as much oil as China does. That means that in one day we use about as much as China uses in a month. I then looked, and indeed the the Chinese demand for oil has gone up, by a whopping 30% or so this year. It is that 30%, or so, that I am told has almost doubled the price of crude and run the price at the pump up by a third in the last three weeks. But wait a minute, what does that mean? Here's what it means, we are being told that the World-wide increase in crude prices is coming from a consumption increase that is equal to roughly 8 hours per month of Consumption in the USA.

Folks, I am willing to buy into the notion that a small change in demand for a product that is, what is it, elastic or inelastic, can make a large change in price, but this is absolutely absurd. I also looked at the excess capacity that is out there among the OPEC countries. Let me give you a clue what that turned up ... be nice to the Saudi's if you know what's good for you.

[BlueEyedSon]

1. I'm not taking sides, cause I don't have exact numbers but

China's increased demand it just the tip if the iceberg. Many 3rd world countries are upgrading their lifestyles to be more American thanks to globalization & off-shoring. What if all developing countries increased their oil usage 30%?

Supply & demand of oil sits on a knife edge, a slight imbalance either way causes big price swings. Supply of oil is very inelastic.

[Kagemusha]

2. It's also threatened by potential guerilla/terror attacks.

So it's inelastic and vulnerable.

Also remember how far the US dollar has gone down, further skewing things a bit.

[BlueEyedSon]

3. True, if you look at a chart of crude in euros/barrel,it's much different.

[NewJeffCT]

4. China's demand will keep increasing

So, 30% this year and then maybe 40% next year and 50% the year after that? Who knows? But the demand shows no signs of slowing down and will keep increasing as their economy keeps growing and more & more consumers demand cars & the freedom and American lifestyle that comes with automobiles. (Shanghai - a city bigger than New York - even has a new suburb called Long Island...)