China and Peak Oil

Why aren’t the Chinese worried about peak oil?

I think they are worried about ensuring as much supply as they can get their hands on right now. In Iran.  In Africa.  In Venezuela. They know that a steady supply of oil is as vital to their rapidly industrializing economy as it was to ours 100 years ago.

It’s different now as obviously oil will be getting much more expensive. But I don’t think the Chinese  worry as much because they can absorb the higher costs of energy within their system, as most everything else is cheap.  Cheap land, cheap labor, cheap buildings.  More expensive energy can be offset somewhat.

It’s the opposite in the U.S.  Over the last 100 years it’s the energy that has been cheap; everything else has been very expensive. Consider our land costs, labor costs, benefit costs, CEO pay,  building costs.  Our present economy cannot take expensive energy added to it.   Something will have to give. Since energy will never be cheap again, it will have to be the other costs mentioned.  We’ve already started on wage and benefit costs.  What will be next?

Now, over time, as the price and availability of oil continue to climb (unless the coming oil shock absolutely wrecks the global economy – which it could), the Chinese will feel its affects too. Basically, all they are doing is stretching out their industrialization a few years longer, but it too will be forced to contract eventually under the weight of high oil prices.

In the short term it sure won’t seem fair to us that China’s economy can continue to hum along while ours remains stuck in perma-recession. All we will see are higher prices, stagnant wages and crumbling infrastructure and yet in their cities we’ll see new roads, gleaming infrastructure, new buildings.  It will make us feel like we’re doing something wrong.  That we can fix what is broken to get us back to what we had.  This will leave us vulnerable to a demagogue.  We’re pretty close now.

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2 Comments

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2 responses to “China and Peak Oil

  1. Gavin

    Fascinating article. I’d love to know more about this prediction of being `vulnerable to a demagogue`. Does that mean a nationalist, neo-conservative, or maybe an isolationalist? Would this potential demagogue seek to increase federal power, or would you consider a Tea Party-ish pol to be someone the US might fall victim to?

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