Is a rising China destined for war with the US? The book Destined for War: Can America and China Escape Thucydides’s Trap by Graham Allison of Harvard has been on many reading lists over the summer, and its warning of a potential — although not inevitable — war has been debated widely.
Whatever you think of the central thesis, it is clear that oil is a potential source of friction between China and the US. The oil and gas reserves of the South China Sea are one factor underlying tensions in the region, with China in April trying to sell drilling rights in disputed waters. Another recent book, Bernard Cole’s China's Quest for Great Power: Ships, Oil, and Foreign Policy, explored Chinese diplomacy, naval power and energy security, arguing that the three were closely linked.
In June, China held a joint naval exercise with Iran near the Strait of Hormuz. It was a very small drill, involving just four vessels in total, but it did put a marker down about China’s interest in the Gulf region. China is the world’s largest net oil importer, comfortably outstripping the US, and much of its crude comes from countries in the Middle East, including Iran. The security of those oil flows will be an increasingly pressing worry as China’s economy expands and its consumption rises. The Nikkei Asian Review reported recently that China was looking at launching a crude contract priced in renminbi, not dollars, which could help Russia and Iran if they need to circumvent US sanctions when selling their oil.
Wang Chuanfu, founder and chairman of BYD, China’s largest maker of battery-powered cars, argued this week that the country was likely to go all-electric for road transport by 2030. “This is not only because of environmental pollution and traffic congestion issues,” he said. “The most urgent reason is China’s oil safety and security. China will run out of oil soon.
In a fascinating presentation at Columbia University’s Center on Global Energy Policy, Laszlo Varro, chief economist of the International Energy Agency, cast doubt on the ability of electric cars to make much of a difference to oil demand in the short term. "It's going to be a long and hard journey to squeeze oil out from the transportation sector," he said.
David Sheppard and Anjli Raval in the FT pointed out that low oil prices of the past three years have started to stimulate growth in demand, sending consumers back to gas-guzzling cars. That kind of rebound effect is likely to be a critical factor as the effects of the electrification of transport play out.
China’s concerns about its growing import dependency and the potential vulnerability of its oil supplies are the context for some striking observations made by Kristine Petrosyan of the IEA in a commentary on global oil supply and demand. “Since 2015, most of the excess crude oil has found a home in China”, she writes. “Most of the additional oil is likely to have built up in Chinese strategic petroleum reserves or in commercial inventories.”
In 2015-16, the rest of the world was still building up its oil inventories, the IEA calculates, but this year it has been in aggregate running down its stocks, even as China has still been adding to its reserves. In some cases, the transfer from other countries’ reserves to China’s may have been direct. In July Reuters reported on a cargo of crude sold from the US Strategic Petroleum Reserve at Bryan Mound that was unloaded at the port of Qingdao in China.
Ms Petrosyan observes: “If China continues to buy big volumes, there is still some cushion in the global market. The key question is whether China will want to purchase even more oil.
In New York, last week was Climate Week, when leaders from government and business gather to discuss how to cut greenhouse gas emissions and help vulnerable communities become more resilient to the threats they face over the coming decades. It coincides with the UN General Assembly meeting, which means that as the debates go on, the streets outside are packed with black SUVs crawling at less than walking speed through the congested streets of Manhattan.
Announcements made during the week included a new commitment from a group of international companies to shift their fleets to electric vehicles by 2030. The 14 US states plus Puerto Rico that have pledged to cut their greenhouse gas emissions by 24-29 per cent from 2005 levels by 2025, regardless of federal policy, reported they were on trackto achieve that objective.
In other climate-related news, the cities of San Francisco and Oakland have sued ExxonMobil, Chevron, Royal Dutch Shell, BP and ConocoPhillips, alleging that the companies contributed to global warming while playing down the risks and attempting to “discredit the mainstream scientific consensus” on the issue. The National Association of Manufacturers described the lawsuits as “frivolous”.
Michael Liebreich, founder of Bloomberg New Energy Finance, delivered a characteristically excellent presentation on the rise of renewables and their implications for fossil fuels, at his company's Future of Energy Summit in London.
The US International Trade Commission is pressing ahead with a process that could lead to steep tariffs on imports of solar panels into the US, putting the industry's future into the hands of President Donald Trump.
And finally: many people have been fascinated, and disgusted, by the giant “fatberg” found blocking a sewer in east London. Now there are hopes that it can be turned into a valuable energy source.
Source:-Ft.com
