Chinese Demand For Oil

Lynne Kiesling

James Hamilton’s recent discussion of Chinese oil demand mentions the government actions to subsidize oil consumption to fuel economic growth (yikes, what a far-flung distortion!). A WSJ article (subscription required) from Wednesday describes the consequences of China’s refined fuel subsidies: shortages and queues.

Drivers in southern China have been queuing for as long as three hours for a tank of gasoline this week, only to face limits on spending and prohibitions against filling spare containers. In Guangzhou city, protests erupted briefly at the Luoxi Gas Station yesterday after attendants provided dwindling supplies to police who jumped to the front of the queue. After a busy morning, Luoxi tapped out. …

… Beijing has kept a tight grip on fuel prices, because they are central to the cost of transportation, utilities and industrial production. Government officials fear that any sharp spike in fuel costs would spur inflation and, possibly, social unrest.

Sounds to me from this article like they are getting social unrest because of the shortages and queues, a consequence of failing to allow real markets to adapt to changes in real conditions.

9 thoughts on “Chinese Demand For Oil

  1. It was a major strategic error to block the Chinese purchase of Unocal. Now they are going to Iran.

  2. Demand for oil and energy is a true measure of a county’s GDP.
    No lawyers, minimal product tort ramifications, and forthe most part real producer capitalism will reflect a county’s real GDP. Who consumes more energy, the US or China? Interesting concept?

    Is the global economy at the brink of a breakdown much greater than its predecessor in 1929? How do the current imbalances compare to those late Roaring Twenties’ similar circumstances of consumer-level forward consumption, debt, overvaluation of assets, and industrial overcapacity? Will the devaluation and asset decay process at the end of the second 70 year sub-fractal – contained within the 140 year Second Grand Fractal cycle beginning in 1858 – be greater than at the end of its first 70 year sub-fractal?

    A chicken in every pot and two cars in every garage has been replaced with eating out three of seven nights at the plethora of fast food and dining opportunities that ‘froth’ the highways and typify the service type of economy the States have become. Three SUV’s and a Hummer distributed between a primary residence and an investment residence have superseded the two cars in a garage. Buy a radio or washer on credit has been bested with buy and buy with abandon everything imaginable with ubiquitously facilitated debt from refinanced or second mortgages based on the surety of ever appreciating house prices -the latter caused in part by fed fund rates 1/4 of the rates in 1928.

    The evenly balanced declining and increasing annual GDP growth rates prior to 1929 have been replaced with continuous positive annual GDP’s growth rates during the past 45 years. The great creditor nation status of 1929 has been substituted with a beggar man debtor bravado country wearing only the emperor’s new clothes. Its treasury is writing bad checks against future income that can only be guaranteed if the remaining 57 percent of the US private (nongovernmental) work force becomes governmentalized allowing a Weimar type of hyperinflation. In short the consumer saturation point of 1929 looks very appealing against the very poor economic hand that America now holds. Consider America’s current financial balance sheet and thereafter consider how badly the unbalanced excesses of 1929 unfolded.

    In the next nine weeks, data – which has always been there – will be re-recognized. GM’s and Ford’s junk bond status and their probability of default on a collective 450 billion dollars of debt will reappear. The thousand mirrors that reflect a single dollar in the derivatives markets will have key reflecting glasses broken erasing the image in 925. The housing bubble, that is so historically remarkable in its uniqueness in that virtually all know it to be a bubble, will crack. The microcosm of forward consumption in the last two months of the American auto business will witness the expected necessary microcosm of historically poor follow-on monthly sales. Major airlines will throw in the towel declaring bankruptcy and pension amnesty. Declining monthly GDP will receive attention. The real position of the individual debtor and the debtor country in the face of declining asset valuations and projected tax revenues will get its due. Fiscally impossible city and state governmental pension funds whose futures are tied to the equity markets and escalating real estate property values will have a viability reality check. For the first time in many years the concept of consumer retrenchment will be seriously and widely explored as a probable scenario.

    The comparative initiating decay fractals at the secondary summit, with respect to March 2000, of US equity indices suggest a very remarkable primary revaluation. Watch the general trend and descent of the long term US note and bond debt markets as exiting money from equities and commodities flows into these long term debt instruments driving their interest rates lower. Gold has potentially only one more week before completing its maximal 12/30/30 weekly growth cycle with an abrupt devaluation. Opposite to gold, the dollar will transiently trend well. Expect the unexpected. Within this quantum fractal decay process, expect nonlinearity. Gary Lammert

  3. Gas lines (caused by government mismanagement of fuel supplies) caused huge discontent in the USA and probably at least one change of party in the presidency.

    Wouldn’t it be ironic if the failure of Beijing to pay attention led to the same outcome there?  Oh, how delicious that would be.

  4. NEW ENERGY CURRENTS: 2005-09-02

    I am speechless/blogless on the unprecedented disaster of Hurricaine Katrina, other than to link again to Instapundit’s massive-and-growing list of charities and to offer my prayers, thoughts, and meaningless condolences in the face of all this – I spe…

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