China's Thirst For Oil Shrinking ?  

Posted by Big Gav

So where is all this oil money for constructing artificial islands coming from ? China has $40 billion oil deficit (a case of the 1970's wealth transfer from developing countries to oil producers and the US repeating itself).

Some reports say chinese consumption fell last quarter, but analysts are divided. Morgan Stanley's Andy Xie is in the declining demand camp and (still) forecasting an oil price collapse. It will be interesting to see if Asian growth evaporates in the face of high energy prices and the end result is deflation - both generally and in energy prices as well (The Oil Drum is also pondering this idea).

World oil prices could soon collapse with the market vastly overestimating the demand for oil within Asia which is declining in line with slowing economies, a regional economist with Morgan Stanley said in a report. Hong Kong-based Andy Xie described this year's surge that took world oil prices to record highs last week as a 'speculative bubble'.

'I have never seen people buying something on what I believe is so much misinformation,' Xie said in his report. 'Oil bubbles do not last because they depress economies and, hence, demand. 'This is why I believe that the days for the oil bubble are numbered. As the weak economic data and oil demand data pour in from Asia, some speculators could run, which could, in my view, trigger a stampede.' Xie said general opinions in the oil market wrongly attributed the current high prices to strong Asian demand rather than speculative demand. He said Asian economies, and thus the region's demand for oil, were decelerating.

Bloomberg reports that oil tanker booking rates have surged again, so clearly there is an increase of production (or at least shipments) from the Middle East. The Oil Drum has noted the murkiness of the meaning of these numbers though.

In other Chinese news, they have been signalling a desire to buy whatever uranium we are willing to produce - but its softly, softly at this stage.

Moving to the other edge of the China Rim, an unreliable source (and that's being nice) has this frightening tale to tell - "Russia and China Activate Ten Combat Divisions to Counter United States as Caspian Oil War Appears Set to Begin". This may just be some sort of Russian mirror-world wingnut news article, but even if its just rabid speculation, it does at least have a solid footing in the recent announcement from the Shanghai Cooperation Organization demanding the US announce a withdrawal timetable for its military bases in Uzbekistan and Kyrgyzstan (unsurprisingly, some equally rabid commentary can be found at Free Republic on the same topic -
Russian Intelligence Analysts are reporting today that both President Putin (Russia) and President Hu (China) have ordered the immediate activation of 10 Combat Ready Divisions to counter the increasingly aggressive moves being made by the United States in the Caspian Oil Regions of Central Asia. Special Forces Army Units of both Russian Spetsnaz and Chinese Immediate Action Units were also ordered to be immediately deployed to both Uzbekistan and Kyrgyzstan to surround the large American Military bases in those regions, and that the governments of both of these countries have ordered the Americans to leave.

Continuing on the theme of fear mongering, the FT has an article quoting a Chinese general saying that China is prepared to use nuclear weapons against the US if it is attacked by Washington during a confrontation over Taiwan.

According to the Doomsday Clock there is still 7 minutes to go until midnight - so the threat of us all getting blown up isn't considered imminent just yet...

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