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Zeno, check out the long term oil chart at www.wtrg.com/oil_graphs/oilprices1869.gif and see if you can discern a trend . I wont put any ideas in your head right now . I would like to hear your thoughts first .
Jan 27, 2004 (Knight Ridder Washington Bureau - Knight Ridder/Tribune Business News via COMTEX) -- BEIJING -- China's hopes for bringing huge amounts of oil from Russia's Far East to its energy-thirsty populace may end up being a pipe dream.
A decade ago, China and Russia began studying the feasibility of building a large oil pipeline from Anagarsk in Russia to Daqing in northeast China.
The project received high-level support in Beijing and Moscow and looked like it might cement a new energy relationship between the two wary neighbors. Few people live in Russia's Far East, while China has a huge population.
But a combination of Japanese "dollar diplomacy" and the sudden jailing last fall of a Russian oil tycoon has put the project on hold, perhaps permanently.
Just eight months ago, China's state oil company and a Russian counterpart, Yukos, signed an agreement for oil sales, contingent on the building of the 600,000 barrel-per-day pipeline.
Since then, however, Japan has offered Russia a counterproposal. It calls for an even larger pipeline to be built from Siberia to the Pacific coast port of Nakhodka, skirting China entirely, but giving Russia access to markets in Japan, South Korea and elsewhere in East Asia.
To sweeten the deal, Japan said it would finance the project with a $7.5 billion loan. It also held out the prospect of development funds for Russia's Far East.
"The Japanese can practice 'money diplomacy.' They are richer. They can throw money at the Russians," said a Chinese government oil analyst, speaking on condition of anonymity.
To complicate matters, Russian President Vladimir Putin jailed the president of Yukos, Mikhail Khodorkovsky, last October, charging him with tax evasion and fraud.
Since then, Russia and China have been silent on the pipeline's prospects.
"This signals a rethinking of the Russian-Chinese strategic relationship," said Ilan Berman, vice president of the American Foreign Policy Council, a Washington policy group. Berman said Putin might have grown wary because he believes "China is rising and that China will inevitably become a strategic competitor."
China is still waiting for a definite answer from the Kremlin.
"The deadline is always postponed. I think the Russians don't want to make China unhappy," the Chinese analyst said.
The tank farms would hold a 30-day supply of oil. In comparison, the U.S. government maintains a federal strategic reserve that holds 53 days of U.S. oil consumption, but the Department of Energy says federal strategic reserves in combination with private stocks of oil could last 150 days.
--Beijing is pushing China's three major oil companies to thrust far abroad -- into Africa, the Middle East and South America -- to invest in oil field concessions. The companies are moving quickly even though they remain newcomers to global competition.
--Worried about possible threats to international sea lanes, China has courted its northern neighbor, Russia, and several Central Asian republics to the west to build energy pipelines to China, a strategy that has hit some roadblocks.
Some officials say China will seek greater cooperation with Western nations to ensure safe supplies and transport of oil.
"My view is that the more China becomes integrated globally, the safer it is," said Feng Fei, author of a recent paper on state energy policy for the State Council, the highest organization in China's central government.
Production is decreasing slightly at China's largest oil basin, the mature Daqing fields in the northeast, and remains stagnant at smaller fields such as Renqiu, about 90 miles south of Beijing. China produces about 3.39 million barrels of oil a day.
"China's production simply is fixed. It's flat. It's not growing," said Wu, the East-West Center researcher.
Even as China looks to neighboring Kazakhstan and Russia for new oil supplies, it relies heavily on the Middle East, which supplies about half of its imports.
And with only about 20 warships capable of operating far from China and no naval bases in the Middle East, experts say China can't protect oil shipments. It must rely on the U.S. Navy.
"They can sit there and talk about buying an aircraft carrier from Russia, but we all know that you can't protect sea lanes with one aircraft carrier," said Steven W. Lewis, an expert on China's oil policy at Rice University in Houston.
Chinese experts say they often face questions about China's oil security.
"Many people ask me: In case China's oil supplies are threatened, what will China do?" said Dong, the Petroleum University vice dean.
RENQIU, China, Jan 27, 2004 (Knight Ridder Washington Bureau - Knight Ridder/Tribune Business News via COMTEX) -- The horizon here is dotted with the bobbing arms of rusted oil pump jacks that can't draw enough crude out of the ground to fuel China's surging economy.
"The reserves are limited," said oil worker Geng Shuguo, toiling at an aged pump.
China has hit a plateau in oil production; yet its appetite for energy soars. China's likely to surpass Japan this year as the world's No. 2 consumer of oil, after the United States, forcing it to rely more on oil imports. China's global oil purchases are jostling energy markets and helping to keep world oil prices high, including at U.S. gas pumps.
Huge energy demands in China are painfully obvious. Regular blackouts this winter have hit parts of the central, eastern and southeastern regions. Urban traffic jams attest to China's swelling middle class and its rush to buy cars.
Oil imports rose some 31 percent last year, a surge that the International Energy Agency called a "breakneck pace." China now imports a third of its oil. The U.S. Energy Information Administration forecasts that by 2020 China will import two-thirds of its crude, or up to 7 million barrels a day.
That means China -- like the United States, which imports two-thirds of its oil -- increasingly must scour the world, particularly the Middle East, for stable oil sources.
"People worry that if there is a constraint of oil supplies, China and the United States will compete for oil," said Kang Wu, a research fellow at the East-West Center, a research facility in Hawaii funded by the U.S. government.
Senior Chinese officials, scrambling to reduce strategic vulnerabilities, clearly are uneasy over the nation's growing reliance on imported oil.
"In case something unexpected happens, say a war broke out, China's oil shipments would be stopped. It would have a very serious effect on China's economic development," explained Dong Xiucheng, vice dean of the Petroleum University near Beijing.
Dong and other academic and government experts say Beijing is taking steps to stabilize and ensure the nation's oil supply:
-- Later this month, China is likely to approve creation of a $1.2 billion strategic petroleum reserve.
While mutual interests in securing stable oil resources may force China to cooperate with the United States, experts say Beijing also has pursued a strategy of courting oil suppliers such as Sudan and Iran, nations the United States considers to be sponsors of terrorism. U.S. law bars major oil companies from working in the two countries.
"These arrangements are troubling, especially to the extent they might involve political accommodations and sales or other transfers of weapons and military technologies to these nations," wrote Roger W. Robinson and C. Richard D'Amato, the chairman and vice chairman of the U.S.-China Economic and Security Review Commission, in a Dec. 17 letter to Congress.
Washington has accused China of providing weapons to various oil-producing nations, a charge Chinese authorities vehemently deny.
Some say Middle Eastern oil suppliers may lean on the Chinese further for weapons and investment.
China "cannot escape from depending on the Middle East. Now, it's 50 percent (of its imports). By 2010, it'll be 60 or 65 percent. By 2015, it'll be 70 percent or higher," Wu said.
Lewis, the Rice University expert, said outsiders don't know whether China has resolved an internal debate over whether to pursue energy deals with individual oil states, including those hostile to the United States, or seek broader approaches, such as joining the International Energy Agency, the Paris-based group working to prevent oil supply emergencies.
"It's not clear which parts of the (Communist) Party and which parts of the military favor which strategy," Lewis said.
China, meanwhile, has gone on a binge to obtain more oceangoing oil tankers and upgrade ports and refineries to transport and process the increasing flow of imports.
Chinese officials also remain upbeat about the prospect of finding new oil reserves, increasing the use of nuclear power (now 1 percent), finding cleaner ways to use its abundant coal and improving automotive efficiency.
Website not found. Bullbeard et al has previously said oil should be $60 per barrel in real dollars today. Thus i would conclude the benefits of Empire have kept the oil prices down. As the dollar loses its mojo in the rest of the world a $60 oil price target would only be part of the great $$$ currency shock realignment. As such a price would bring the economy to a stop there an frenetic act ending finale will most probably ensue...