{"id":452485,"date":"2010-03-20T10:13:00","date_gmt":"2010-03-20T14:13:00","guid":{"rendered":"tag:blogger.com,1999:blog-16711557.post-5873705306409295672"},"modified":"2010-03-20T10:13:51","modified_gmt":"2010-03-20T14:13:51","slug":"chinas-growth-shifts-the-geopolitics-of-oil","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/452485","title":{"rendered":"China’s Growth Shifts the Geopolitics of Oil"},"content":{"rendered":"
\"\"<\/a>
China has become an economic powerhouse in Asia and throughout the world. The nation’s stimulus package far outstrips the US. The socialist nation places people before banks.<\/a>
Originally uploaded by Pan-African News Wire File Photos<\/a><\/span><\/div>\n

March 19, 2010<\/p>\n

China\u2019s Growth Shifts the Geopolitics of Oil<\/p>\n

By JAD MOUAWAD
New York Times<\/p>\n

Last summer, Saudi Arabia put the final bolt in its largest oil expansion project ever, opening a new field capable of pumping 1.2 million barrels a day \u2014 more than the entire production of Texas. The field, called Khurais, was part of an ambitious $60 billion program to increase the kingdom\u2019s production to meet growing energy needs.<\/p>\n

It turns out the timing could not have been worse for Saudi Arabia.<\/p>\n

Only two years ago, consumers were clamoring for more supplies, OPEC producers were straining to increase their output, and prices were rising to record levels. But now, for the first time in more than a decade, the world has more oil than it needs.<\/p>\n

As demand slumped because of the global recession, Saudi Arabia was forced to shut about a quarter of its production. After raising its capacity to 12.5 million barrels a day, Saudi Arabia is now pumping about 8.5 million barrels a day, its lowest level since the early 1990s.<\/p>\n

\u201c2009 was painful for us as it was for everybody else,\u201d said Khalid A. al-Falih, the president and chief executive of Saudi Aramco, the kingdom\u2019s state-owned oil giant, and a company veteran who was promoted to the top post at the beginning of last year. \u201cWe experienced the same cash flow constraints that everybody did. But we adjusted quickly and, certainly, everything that was strategic to us was not touched.\u201d<\/p>\n

The recession also precipitated a milestone for Saudi Arabia and the global energy market. While China\u2019s successful economic policies paved the way for a quick rebound there, the recession caused a deeper slowdown in the United States, slashing oil consumption by 10 percent from its 2005-7 peak. As a result, Saudi Arabia exported more oil to China than to the United States last year.<\/p>\n

While exports to the United States might rebound this year, in the long run the decline in American demand and the growing importance of China represent a fundamental shift in the geopolitics of oil.<\/p>\n

\u201cWe believe this is a long-term transition,\u201d Mr. Falih said in a recent interview. \u201cDemographic and economic trends are making it clear \u2014 the writing is on the wall. China is the growth market for petroleum.\u201d<\/p>\n

Saudi officials have said they favor prices of around $80 a barrel. Despite soft demand and high levels of inventories, oil futures in New York have averaged $75 a barrel over the last six months. On Friday, they closed at $80.68.<\/p>\n

In the United States, some experts believe that energy-efficiency measures, as well as the government\u2019s push for biofuels and its plans to limit carbon emissions, are putting the nation on a long-term path to lower oil consumption.<\/p>\n

The American talk about energy independence rankles Saudi officials, who maintain that the goal is unrealistic and could end up damaging energy markets by undermining investment now, thus leading to higher prices in the long run.<\/p>\n

Mr. Falih said he welcomed energy-efficiency measures but insisted that fossil fuels would dominate energy demand for decades.<\/p>\n

\u201cI was here in the 1980s after the 1970s price shocks, and I remember all the debates,\u201d Mr. Falih said. \u201cBut ultimately the policies were reasonable. And the United States continues to search for that reasonable ground.\u201d<\/p>\n

Saudi officials have recognized that structural changes are taking place in the United States. A few months ago, Aramco sold its storage facilities in the Caribbean, a signal that it was abandoning the East Coast market, according to analysts. (The Saudis stopped striving to be the top foreign supplier to the United States years ago. The kingdom now trails Canada, Mexico and Venezuela for exports to the United States.)<\/p>\n

That is not to say the Saudis are cutting ties with the United States. Aramco is expanding its Motiva refinery, in Port Arthur, Tex., which it owns with Royal Dutch Shell, to increase its capacity to 600,000 barrels a day. That will make it the largest refinery in the United States, overtaking Exxon Mobil\u2019s Baytown refinery.<\/p>\n

Edward L. Morse, an energy expert who heads global commodity research at Credit Suisse in New York, said the transformation was a healthy development in relations between Saudi Arabia and the United States. It also means the end of the \u201cU.S. discount,\u201d where Aramco sold oil to American refiners for about $1 a barrel less than to Asia.<\/p>\n

\u201cThe Saudis don\u2019t see the need to subsidize their oil exports to the United States anymore,\u201d Mr. Morse said.<\/p>\n

Last year, Saudi exports to the United States fell to 989,000 barrels a day, the lowest level in 22 years, from 1.5 million barrels a day the previous year, according to the Energy Information Administration.<\/p>\n

Meanwhile, Saudi sales to China surged above a million barrels a day last year, nearly doubling from the previous year. The kingdom now accounts for a quarter of Chinese oil imports.<\/p>\n

Saudi Aramco recently inaugurated a huge refinery in the Fujian province, in the southeast coast of China, which is projected to receive 200,000 barrels a day of Saudi crude, and is looking at a second project in the northeast city of Qingdao.<\/p>\n

It is also planning to build two refineries in Saudi Arabia, as joint ventures with Total and ConocoPhillips, that are primarily destined to ship products to Asia.<\/p>\n

India is also courting Saudi attention. After a visit in March to Riyadh by India\u2019s prime minister, Saudi Arabia outlined a goal to double its exports to India. The kingdom already accounts for 25 percent of the Indian market after its exports grew sevenfold from 2000 to 2008.<\/p>\n

\u201cOil flows are shifting from West to East, and Saudi supplies that used to go to Europe and the United States are now headed for Asia,\u201d said Jean-Jacques Mosconi, the senior vice president for strategy at Total of France.<\/p>\n

Brad Bourland, a former State Department official who heads research at Jadwa Investment in Riyadh, said: \u201cSaudi Arabia used to be very much an American story, but those days are gone forever. That\u2019s just a reflection of a globalized world and the rise of Asia. They now see their relationship with China as very strategic, and very long term.\u201d<\/p>\n

Some energy and security experts have pointed out that the Saudi government is keen on displacing Iranian oil sales to China to persuade Beijing authorities to back tougher sanctions against Iran\u2019s nuclear program, a position that has the support of the United States.<\/p>\n

\u201cWe know the Saudis and others have delivered the message to the Chinese that instability in the gulf is not in their interest,\u201d Douglas C. Hengel, the deputy assistant secretary for energy, sanctions and commodities at the State Department, said last week during a conference in Houston.<\/p>\n

But Jon B. Alterman, a Middle East expert at the Center for Strategic and International Studies in Washington, said that the falling dependence of the United States on Saudi oil could turn into a problem for the Saudis, because the United States guarantees their security in the Persian Gulf.<\/p>\n

\u201cThe Saudis are particularly concerned about the shape of the global market where all the growth comes from the east and all the security comes from the west,\u201d Mr. Alterman said.<\/p>\n

China\u2019s oil demand is set to grow by 900,000 barrels a day in the next two years. Chinese oil consumption reached 8.5 million barrels a day last year, compared with 4.8 million in 2000. It will account for a third of the world\u2019s total consumption growth this year.<\/p>\n

While China is by far the fastest-growing oil market in the world, the United States is still the top consumer: despite the slump, Americans consumed 18.5 million barrels a day in 2009. That amounts to 22 barrels of oil a year for each American, compared with 2.4 barrels for each Chinese.<\/p>\n

\u201cTo me, this is a long-term business,\u201d said Mr. Falih during the interview.<\/p>\n

\u201cAnd that is how I look at the United States and China \u2014 as markets for commodities that will be in demand for years.\u201d
<\/p>\n

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