China oil demand rises by 28%

In an interesting pointer to the world we face in the near future the IEA ( International Energy Agency) reports that demand for oil in China leapt by an incredible 28% in January compared to a year earlier while at the same time they are predicting that demand for oil in developed countries will fall marginally.

This is yet another sign of the tremendous pace at which countries like India and China are developing and the pace at which the balance of power in the world is beginning to shift.

In the West we have been living through the end of a period in which our development was largely driven by cheap readily available oil. But this finite natural resource is now likely to be subject to increasing demand in future years while at the same time the pace of finding new oil reserves is only likely to slow.

The concept of "peak oil" defines the assumed stage at which the point of maximum oil production is reached at which point oil extraction rates go into steady decline as reserves fall. Of course the point at which maximum production is reached depends on a number of factors including price and demand.

if demand goes up then one of two things can happen either producers pump more oil in which case the point of peak oil must be reached sooner ( assuming the rate of finding new reserves doesnt otherwise change) or alternatively producers hold production steady and the price rises.

The west seems ill prepared for either of these two scenarios. We have barely started on the road of alternative energy systems and our road transport systems are built around petroleum. If oil prices rise considerably due to rising demand from these developing countries then we in the west face an even greater challenge because our deficits are largely financed these days from these developing countries who have as I understand it been giving us loans as a way of investing their surplus cash.

Now Im no economist but none of this sounds like good news for us in the West. It seems to me that on the face of it the arguments for rapidly shifting our economies towards alternative energy systems become more compelling by the day.