Sunday, April 11, 2004

Blame China Contd.

More on the increasing Chinese demand for oil.

World oil consumption will rise faster than expected this year because of the surging Chinese economy, the International Energy Agency said Friday.

"The driving force is the expanding economy," said Klaus Rehaag, editor of the report. " We have a significant recovery from the recession that's primarily driven by the U.S. At the same point in time, China and India are expanding extremely rapidly."

The agency increased its forecast for growth in oil demand by 60,000 barrels a day to 1.7 million barrels daily, the sixth consecutive monthly rise in the forecast. Consumption of fuels will drop by 2 million barrels a day in the second quarter - 300,000 barrels less than expected last month - to 78.3 million barrels a day, the agency said in a monthly report.

"China's fast-rising energy consumption fuels most of the growth in global oil demand," the IEA said. "Second-quarter apparent demand may again exceed expectations, despite seasonal maintenance at several large refineries."


China is expected to grow at this blistering pace for some time to come and I don't think that India is very much behind. Meanwhile, Warren Brown from Washington Post on Car Culture:

Current U.S. gasoline prices are high, but they aren't nearly high enough to bring about significant changes in America's automotive tastes or its auto-buying behavior, car executives say. Unless and until that happens, car companies will be forced to build the fuel misers society says it needs along with the gas guzzlers many American buyers really want, judging from their actual market behavior.


It is not that the consumers WANT gas guzzlers. They don't DEMAND low fuel economy vehicles. Instead, they desire certain features. Those features in the past have at the expense of fuel economy. This is a sensible thing to do for both the consumers and manufacturers. The US car makers however have made several mistakes. Firstly, they have not invested enough in hybrids and now they lag significantly behind Toyota and Honda. For regulatory reasons concerning particulates and NOx emissions, american manufactuers are not hot on diesels either. Secondly, the US car makers have lost their edge in the cars market and now rely on the light-trucks (minivans, trucks and SUVs) market. Until now the Japanese were not in this market, but they are making inroads. Detroit is going to find it increasingly difficult to catch up to Toyota and Honda. If I were an investor, I sure wouldn't want to put my bets on Ford!

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