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China's Oil Consumption: Raising Prices at U.S. Pumps?

The United States has been accused for many years - rightly so, I'm sad to say - of being the world's biggest consumer of virtually everything, including several key ingredients to modern industrialized society: grain, beef, coal, steel, and oil.

But you know what? We don't have to take the rap anymore for hogging everything! There's a new kid on the block who's actually been around a very long time and who's now the leading consumer of all of those key materials (except for oil): China. Or, more accurately, the People's Republic of China).

Why should you care? Because China's catching up to us in its demand for oil, and if you think you have worries about prices at the gas pump now, just you wait!

Okay, let's get something straight before we proceed: there are lies, damn lies, and statistics, and I'm going to show you some (you pick which you think it is!). I'm not an industry expert, but I found some figures that I thought were very interesting and that you might want to think about.

First of all, let's take a look at average U.S. regular gasoline prices since 1990.

If you click on the thumbnail to the left, you'll see a chart of regular gas prices (averaged for the country) from August 1990 to June 2007. No, this is not adjusted for inflation or indexed to reflect "real" dollars - this is the pump price as reported by the U.S. Energy Information Administration (they have lots of cool stats - check 'em out!).

But what should leap out at you is that gasoline prices just kind of chugged along at around $1.25 per gallon (give or take) until after 9/11 in 2001 (Number 1). Then the prices started to climb, and spiked in September 2005 after Hurricane Katrina.

Then, interestingly, after the price dropped somewhat after Katrina (from about $3.00 a gallon to around $2.25), there was another spike which - as far as I have been able to tell from sifting through news reports - wasn't attributed to any particularly catastrophic event. It was apparently a surge in demand in the market, driving up the prices.

Finally, those prices dropped back to around $2.25 a gallon, and then they take off again, even higher than they were during Katrina!

So, my first point here - before we get to the "Chinese Connection" - is that if you think oil prices are going to go down, you're sadly mistaken. Additional artificial price controls notwithstanding, prices are going to keep going up: whether you believe in Peak Oil (the point in time where world oil extraction starts to decline) or not, gasoline isn't really going to get cheaper. Ever. And I can tell you why in one word: China.

China is still lagging behind us in total consumption, but it's catching up fast. In the chart on the right, you can see that up until 1993 China was producing more oil than it consumed; in the graph this shows up as a "negative deficit" in the pink line, which is below the 0 mark until 1993.

After 1993, the curve showing China's growing need to import oil has a very interesting property: it appears to parallel fairly closely the annual average price per gallon of U.S. gasoline, which is shown in yellow on the chart.

I don't know about you, but I find this very interesting. I'm not trying to say that China is the sole factor influencing our gasoline prices - hardly! There are many other factors involved.

But I will say that I believe - based on this and Lester Brown's book Plan B 2.0 - that China is having a major impact on gasoline (and other petroleum products) worldwide. It's the old supply and demand principle: China's demand is growing rapidly, but the world oil supply isn't keeping up with it (and, depending on who you talk to, the world oil supply is actually past its peak).

So, what can you do about all this? We can't change what China's doing, but we can do something about what we're doing. First and foremost, do what you can to use less gas, which will also save you a bit of money: drive a bit slower (maybe even drive the speed limit for a change!), use a carpool or public transportation when you can, even ride your bike and get some exercise!

For a more radical change, think hard about what you're driving, or what you want to drive for your next car. Consider a hybrid (although be aware that not all hybrids are created equal in terms of efficiency!) or a diesel, particularly one of the fuel-sipping Volkswagen TDI cars (another plus for the diesels: you can use biodiesel, which helps decrease our dependence on fossile fuels). Or if it fits your needs and you can find one that'll work for you, go for an all-electric vehicle!

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