China President Hu Jintao is in Washington today to chat with President Bush about matters large and small. Firmly entrenched in the former category is oil, the mother of all strategic topics for the countries at the top of the world’s energy feeding chain.
China, as everyone on the planet surely knows, has a large and growing thirst for crude. That thirst arguably will be quenched only by way of a dramatic shakeup in the market for the world’s most valuable commodity and more than a little turmoil on the world’s geopolitical and military stages. The Bush White House expects no less. Reflecting that sentiment is the observation (warning?) to China that it can’t stay on a “peaceful path while holding on to old ways of thinking and acting that exacerbate concerns throughout the region and the world,” according to the National Security Report issued last month by the Bush administration. The “old ways” are defined in the report as follows:
* Continuing China’s military expansion in a non-transparent way;
* Expanding trade, but acting as if they can somehow “lock up” energy supplies around the world or seek to direct markets rather than opening them up – as if they can follow a mercantilism borrowed from a discredited era; and
* Supporting resource-rich countries without regard to the misrule at home or misbehavior abroad of those regimes.
Repricing oil upward to reflect such tensions, in other words, is the order of the day. The 21st century’s version of the Great Game, and it’s being played out around the world. One recent skirmish unfolds as we speak in Central Asia, the site of the original Great Game.
Given this backdrop, it’s not exactly shocking to learn that the price of crude was trading above $72 a barrel this morning in New York futures trading–yet another all-time high. That’s a fitting greeting for President Hu’s arrival in Washington. The increase in oil consumption in the Middle Kingdom far exceeds the pace of domestic production, as the chart below shows. That’s a big deal for the world’s fastest-growing major economy, which is second only to the United States in petroleum consumption.
Source: CBO