econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 04 February 2016

The U.S. Oil Weapon: A Threat To China

Written by , Zhonghua Yuan Institute

China's island building on the four-mile-long and two-mile-wide Subi Reef in the South China Sea has put The U.S. in a tight spot. The reef lies within the 200-mile international limit of the Philippines and is only 26 miles from a Philippino occupied island. To protect its ally from China's aggression, the U.S. will be left with little choice but to constrain China by military means.

subi.reef.spattley.islands

However, it is not likely that the U.S. will directly engage China in war in the foreseeable future, because the U.S. dominates China with its superior naval and air force and the only way for China to level the playing field is to apply nuclear weapons. The nuclear nature of Sino-American warfare would make both the world no.1 and no.2 economy the fallen giants.

So there is a possibility that The U.S. might use economic weapons. One susceptible area at the core of China's weakness is it's huge dependence on oil imports. At the moment, China imports 55% of its oil, almost half of which sails from countries in the Persian Gulf, which amounts to 5.3 million barrels per day and is around 75% of Saudi Arabia's production. As a matter of fact, China's reliance on Middle Eastern oil has gradually grown orewtty much in line with its rapid-increasing demand for oil. Right now, China has achieved the equivalent of the peak of U.S. Oil import dependence and is not slowing down a bit. The single largest source of China's crude oil imports is likely to remain Saudi Arabia.

China's state oil reserves of 475,900,000 barrels (75,660,000 m^3) plus the enterprise oil reserves of 209,440,000 barrels (33,298,000 m^3) will only provide around 90 days of consumption or a total of 684,340,000 barrels (108,801,000 m^3).

Meanwhile, the U.S. is inching towards the energy independence. With the technological breakthroughs of shale gas and tight oil, the U.S. has started an energy revolution: U.S. crude oil production has increased by 50% since 2008. With that increase, as well as more efficient cars, oil imports have come down from their high of 60% in 2005 to 35% today - as low as in 1973. With domestic production and gasoline mileage still increasing, imports will continue to decrease. It's also impressive that U.S. natural gas production has increased by nearly 33% since 2005, and shale gas has gone from 2% of output in 2000 to 44% today.

As of 2013, the United States is the world's second largest producer of crude oil, after Saudi Arabia, and second largest exporter of refined products, after Russia. According to BP Plc's Statistical Review of World Energy, the U.S. has surpassed Russia as the biggest oil and natural-gas producer in 2014. While looking at total energy, the U.S. was over 70% self-sufficient in 2008. In May 2011, the U.S. became a net exporter of refined petroleum products.

With the newly acquired oil might, the U.S. can trick Iran to block the Strait of Hormuz without any economic damage onto the U.S. itself, in order to strike a severe blow to China's fragile economy. With the failure of the U.S. congress to reject the Iran nuclear deal the likelihood of an Israeli air strike against Tehran's nuclear facilities has been reduced. Thus a retaliation by Iran by blocking the Strait of Hormuz is no longer as likely. But the U.S. has many other ploys it could use to provoke Iran. The Strait is the only sea passage from the Persian Gulf to the open ocean. If it's blocked, China will scramble to meet its oil demands. In China, the inflation will jump up; the China yuan will plummet, and an economic meltdown will come to bear.

China will succumb to the U.S.'s might of oil weapon to save itself from political, economic and social collapse. The oil weapon will achieve what the military can't achieve at less cost. This scenario is something China should be really worried about.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Opinion Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.




Econintersect Opinion


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Why Long-Run Theories of Profit and Accumulation Fall Short
Brexit - Who Wins and Loses
News Blog
GOP Healthcare Plan Would Cost The Poor And Old The Most
These Amazing Creative Animals Show Why Humans Are The Most Innovative Species Of All
Earnings And Economic Reports: Week Starting 24 April 2017
What Americans Think About Climate Change
What We Read Today 23 April 2017 - Special Public Edition
What We Read Today 23 April 2017
What Would A Civilization 1 Billion Years Older Than Us Be Like
Understanding The Downward Trend In Labor Income Shares
Why Renegotiating NAFTA Could Disrupt Supply Chains
Public Relations Nightmares
Catch Me If You Can
U.S. Consumer Debt Rises Overall, Housing Debt Drops
Infographic Of The Day: Graphene Is The Game-Changing Material Of The Future
Investing Blog
Markets Rally As Expected
The Week Ahead: Build That Wall!
Opinion Blog
What Does The Strong Q1 Growth Mean For China?
Marx, Orwell And State-Cartel Socialism
Precious Metals Blog
Three Gold Plays For The New Era Of Chaos
Live Markets
21Apr2017 Market Close: US Stocks Slipped Moderately, WTI Crude Slips On Renewed Concerns Of Increasing U.S. Production, Industrial Businesses' Cash Outflows Concern Investors
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government































 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved