China turns on demand power

China turns on demand power
By Sreeram Chaulia

source: Asia TImes Online

American journalist Matt Taibbi employed a grotesque analogy last summer to describe the Wall Street titan Goldman Sachs as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.

In the energy industry, a similar phenomenon has arisen to invite respect, admiration and fear – China’s appetite for oil. No survey of the oil sector’s present and future can now afford to omit the China factor and its multiple ramifications.

This major new reality in geo-economics has just been underscored by a report from the International Energy Agency (IEA) that reveals that China has overtaken the United States as the world’s largest energy consumer. With a total usage of 2.25 billion tons of oil equivalent in 2009, China has forged ahead of the US, whose figure stands at 2.17 billion tons, according to the report. Zhou Xi’an, an official with China’s National Energy Administration, later rejected the IEA report, according to the Shanghai Daily.

Even allowing for the economic slump since late 2008, which considerably reduced US oil demand, China’s continued growth means the country is well placed to stay on top of the energy list of customers.

The IEA’s disclosure marks a second major milestone in contemporary energy history since 2003, when China left Japan behind to become the second-biggest oil consumer. Clearing the field of even the US is testimony to the fast growth of China’s economy, which is poised to supercede Japan soon in size of gross domestic product (GDP).

The “rise of China” genre of opinion has rightly been focused on China’s exports, its record foreign exchange reserves and its fast modernizing military, but the flip side is the power that China is accumulating by virtue of the scale of its imports of raw materials and commodities.

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