Skip to comments.China's Fuel Problems, or, A Shortage of Sand
Posted on 11/01/2007 8:47:24 PM PDT by grey_whiskers
See for example this article as well...
It seems to be a commonplace these days that the days of the West, especially the United States, are numbered. We are about to be supplanted by a rapidly-growing China, combining an inexhaustible supply of young, cheap workers, a spirit of entrepreneurism greater than anything the United States has ever seen, and the worlds largest foreign currency reserves. Even tech giant Cisco Systems has announced it will be spending 16 billion dollars over the next 10 years in China. (How many US programmers and techies, by the way, could Cisco afford for that kind of money?)
China, it seems, can do no wrong. Or can it? Passing over for now the reports of contaminated toothpaste, the lead-laced toys, or the industrial pollution. After all, arent these merely the growing pains of industrialization, similar to that which Europe and America have passed through and conquered? Is there any flaw in the plans of the Chinese Communist Central committee which might throw a monkey wrench into the works?
I came across a story on Reuters recently yes, that Reuters. Just because they suffer from Bush Derangement Syndrome does not keep them from licking their chops when there is trouble elsewhere in the world. If it bleeds, it leads is still the rule in every newsroom.
BEIJING/SHANGHAI (Reuters) - China's worst fuel crisis in two years spread to the capital and other inland areas by Wednesday, and one man was killed in a brawl at a petrol station queue, upping pressure on the government to intervene.
Did you hear that? People in China are killing each other over long lines at the gas station! This brings us back all the way to the days of Jimmy Carter in the United States. (Speaking of dimwit leftists.) But some of the facts repeated later in the article are even more fun and instructive:
Diesel costs about 64 cents a liter at the pump in Beijing, versus around $1 in Singapore and $2 in Britain.
But a recent rally in global crude prices to above $90 a barrel has deepened large firms' losses and made them ever more reluctant to keep markets supplied.
A source at PetroChina said the company would lose 1,500 yuan ($200) a tonne by selling imported diesel at Chinese pumps.
So what, you say. China has huge foreign currency reserves. They can afford it. Not forever! There are several problems here. First, there is the issue that if China subsidizes its industries below cost, they will gain market share which sounds good in the short term, but it will mean that those industries will grow larger, and require larger subsidies over time. Second, there is the problem, already discovered by Socialists in the United States and in Europe, that once a group becomes accustomed to sucking on the government teat, they are *very* reluctant to let go again. This means that the subsidies may become a permanent drain on the government coffers too big to fail is not just seen in America. (And, by the way, once other people hear about how good a living one can make mooching off of the government, they will demand their share too. Abraham Lincoln said that a nation could not endure half slave and half free, but it applies to socialist and capitalist economies too.)
So that is the long term, theoretical risk facing China. But there is a more immediate one. Dont forget that price acts as a signaling mechanism, to communicate scarcity or plenty. In a market-based economy, supply and demand rulesif there is too much demand for an item the price will go up to compensate, lowering demand, and sending opportunity (in the form of larger profits) to knock on the doors of other suppliers. In China, there is no such signal. And we all know what happens when you price an item below its market value. Shortages. As the old joke goes, if the Communists took over the Sahara Desert, what would happen? The answer nothing much for two years, followed by widespread shortages of sand.
But the problem for China is with so much of their economy based on manufacturing and export, and much of that very inefficient and their economy also based on Command-and-Control, lacking mechanisms to adapt what kind of a shock will result when the inevitable shortage occurs? Will China be the ones to launch a War for Oil, rather than (as claimed of Iraq) the U.S., or (as in Tom Clancys Red Storm Rising), the old Soviet Union?
Good questions. China is running like a bull in a China shop(pun) They do not use social and industrial or economic checks and balances
By way of comparison we hear about ructions in Iran over rising prices for gasoline.
Gasoline is heavily subsidized there and as a result, people use a lot of it. Of course, when something is artificially price-capped that means there’s no incentive to make more of it. Which is why Iran’s own refining capacity is so limited. Why build refineries when there’s no opportunity to make money at it?
We have been reading about China’s exploding appetite for energy, I gather subsidized fuel prices have everything to do with that.
I’m having difficulty how a “War for Oil” would work in the here and now. The world price is the world price whether it comes from halfway round the world or your own back yard.
The Imperial Japanese invaded the Pacific because the embargo physically prevented them from buying oil anywhere at any price.
How’m I doing so far?
$.64/liter = $2.42/gallon.
Take away just some of our extra taxes placed on gas, and you’ve got the same rate here, also without subsidizing.
I thought it was running more like a Chinese Fire Drill.
And remember the exchange rate, per capita income and most costs are still much less over there.
Lets not make this a pissin contest ;0)
It just like apartments in New York City. Control rents to “help” the poor and guarantee a shortage of affordable housing. The flip side of this is that the better educated more prosperous will snap up those subsidized/controlled apartments (rent control is just a subsidy paid by the landlord to the tenant in the form of foregone rent). They are much more proficient at gaming the system than the poor. Therefore, you wind up not only with a shortage, but with the poor being victimized by this shortage much more than if the product/housing was decontrolled and supply was allowed to increase. NYC’s solution, billion dollar subsidies to renters and billion dollar subsidies to builders. Complete insanity that is being replayed around the globe in different circumstances but with similar results.
Its all fun and games till someone gets hurt ;0)
China needs to perfect the amorphous silicon solar cell, since they have no electrical distribution grid. They now are the largest producers of such cells in the world, and this is their only “out” when it comes to energy. Copper for a grid is just as scarce as oil...
Look to China for solar power.
I saw an african fellow lamenting that the UN and do gooders force Solar energy on them and it isn’t as efficient as conventional energy.
The fellow connects the dots and asks: “How can we run a Steel Mill on solar panels”?
And you are right, Copper is scarce
A thousand watts per square meter... When you consider that ALL energy except nuclear is solar in it’s origin, it makes sense... The big advantage is that the power can be produced and used without a distribution network...
“A thousand watts per square meter...”
Really? Thats serious energy.
The poor fellow I told you of ewas a doctor who ran a clinic. he had 2 panels in the roof and all he had in the clinic on electricity was a refrigerator(with vaccine inside) and a single compact fluoresent light bulb. He lamented that he could not run both off the solar panels and had to shut the clinic at nightfall.
1000 watts is a lot of power
1 square metere of panels = like 100 volts x 10 amps like enough to power half an american home.
Still, impressive for solar panels
I heard or read somewhere recently that Chinas demand for petroleum is growing by 10 percent per year. Maybe someone can extrapolate that out to what percent it will increase the cost of fuel annually.
We need to know the price elasticity for that -- you just inspired *another* vanity.