Crude oil is selling for more than $60 per barrel. The average cost of a gallon of gas in the United States rose last week to $2.55. Yet, the Organization of Petroleum Exporting Countries (OPEC) is not embargoing America. So, why is it so expensive to fill your car these days?
One cause is beyond the control of U.S. policymakers: Global demand for petroleum is increasing faster than supply, pushed by fast-growing economies in the world’s two most populace nations, India and the People’s Republic of China.
In just the past decade, PRC oil consumption has more than doubled, and in 2003 the PRC eclipsed Japan as the world’s No. 2 consumer of petroleum after the United States.
Today, the United States and the PRC are competing consumers in a world oil market that, history shows, does not always play by free-market rules.
Both nations are heavily dependent on imported oil. In 2003, the United States consumed 20 million barrels of oil per day, of which 11.2 million barrels per day (or 56%) was imported. In 2004, the PRC imported 44.6% of its oil.
Both countries remain dependent for oil on politically fragile regions—regions where anti-American sentiments are more prevalent these days than anti-Chinese sentiments. In 2003, 21.4% of the oil consumed in the United States came from the Persian Gulf. Meanwhile, according to the federal Energy Information Administration, all OPEC nations provided 42.1% of U.S. oil imports in 2003, and will provide more than 60% in 2025.
To remove as much risk from the oil market as it can, the PRC’s three state-owned oil companies—the China National Petroleum Corporation (CNPC), the China Petrochemical Corporation (Sinopec) and the China National Offshore Oil Corporation (CNOOC)—have moved aggressively in recent years to purchase oil assets around the world, including in Azerbaijan, Canada, Kazakhstan, Venezuela, Sudan, Indonesia, Iraq and Iran. Just recently, CNOOC withdrew its state-subsidized bid to buy U.S.-based Unocal, with its large oil reserves. Also, the PRC has been talking with Russia about building pipelines to carry Russian oil into China.
Here in the United States, President Bush earlier this month signed an energy bill that did not open any part of the Arctic National Wildlife Refuge or off-shore coastal areas to oil drilling.