By Michael J. Economides, Omobola Ajao, Hoagie Merry
For more than a decade China has been making headlines in energy news, always at the superlative degree and always as the emerging superpower comparable to the US, the reigning super power. Despite US involvement in two wars and reducing dependence on foreign oil imports thanks to a domestic renaissance of its oil and gas industry, it is the impact of China that is prominent on the world news stage.
There were people who believed the Chinese propaganda which, until 1990, was telling the world that China would continue to be self-sufficient in oil production. That was until 1993, when the cross-over between the production and consumption curves became transparent and frighteningly obvious. From then on, Chinese oil demand never looked back and posed some of the most startling trends in the world. The most noteworthy of which was an unprecedented rate of growth of more than 20 percent per year, three years in a row, in the early 2000s.
What the events of the last few years have shown is the resilience of the American economy, and to a large extent, the capabilities of American ingenuity.
From 2005 to 2007, US oil consumption exceeded 20 million barrels per day, peaking at 20.8, during which time the price of oil was on a constant upwards trend, fueled by nasty headlines such as Vladimir Putin’s usurpation of Yukos and Sibneft and Hugo Chávez re-nationalization of the Venezuelan oil industry. The oil price of $40 per barrel in 2004 shot to almost $150 per barrel by July 2008.
Then there was talk about ongoing US energy dependency, with 12 million barrels per day of oil imports, intertwined with global warming rhetoric and even more nonsensical alternative energy “solutions” such as solar, wind and biofuels. Politicians had a field day trying to engineer, often in ridiculous ways, America’s energy makeup and security.
And finally there was the economic collapse of 2008 just before the US election, crashing the price of oil back to $40 per barrel almost overnight. While the price of oil recovered to $100 per barrel, which is now considered to be the new normal, demand in the US stayed down, with consumption of oil flattening out to at least 2 million barrels per day below the 2005 peak.
But the most astonishing event since then, almost defying the economy and certainly the politicians’ rhetoric and social engineering, is the enormous increase in US oil production, to a large extent a by-product of the “shale revolution”. From a production of 8.2 million barrels per day in 2005 and 8.4 in 2008, it has increased by about one third to 11.5 million barrels per day today. The net impact on imports is a reduction of around 5 million barrels per day, a truly spectacular turn of events.
The adroit deployment of technology, the new understanding of the resource, the efficiency of the feat, and the level of engineering prowess will all offer future historians a number of complimentary epithets for the US petroleum industry and its current practitioners.
However, this leaves China, whose petroleum demand is slated to increase at a torrid pace of 13 percent between 2011 and 2014 (to more than 11 million barrels per day, and no chance to increase in domestic production) in the unenviable position of becoming the world’s largest importer.
Michael Economides is Editor-in-Chief of the Energy Tribune