How Will China’s Energy Needs Affect the US?

Share Article

While the United States remains the largest consumer of oil in the world, China’s consumption has doubled in the past ten years. Making them the second largest global consumer. And, as their economy and rapid industrialization continues, many are asking what impact this may have on US energy prices and the economy.

The Awakening of Beijing. In his recent article The Integration of Giants Into the Global Economy, Gary Saxonhouse argues that China’s needs could create “potentially destabilizing demands for energy products.” Growth of such demand could easily cause the price of a barrel of crude oil to increase beyond its current rate of over $60 – which is triple its average cost during the 1990s.

Continued energy price spikes could well send shockwaves throughout the US economy, as the average consumer is not immune to ever-increasing hikes at the pump – especially given American demand for gas-guzzling SUVs over the past decade. Nor is the country’s public transportation infrastructure as progressive and developed as Europe’s – and able to accommodate a fundamental shift in our commuting model.

Oil – the Economic Snowball

What we learned in the aftermath of Hurricane Katrina is that when supplies tighten and demand remains the same, the price of a gallon of gasoline is sure to rise. And, as increased gas prices eat up more of consumers’ wages, there is less disposable income for other goods. When the higher cost of home heating oil is factored into the equation, it becomes a double whammy. This is the beginning of a downward economic spiral.

As companies across the country see a drop in consumer spending, their own performance declines correspondingly. Nor are consumers the only demographic impacted by higher gasoline prices. In the United States a significant amount of consumer goods are transported long distances by highway, rail and airfreight. Increases in these transportation costs in turn drive the cost of consumer goods up. The net result is that the average American has less money to spend, and the price of items is more expensive.

As the effect snowballs, many retail and production companies’ performance would begin to suffer. Forcing them to cut their expenses in order to meet earnings expectations, the most fluid of which is labor. And on it goes.

Energy Independence Is the Solution

During President Bush’s 2006 State of the Union address, he spoke of our need to limit foreign oil requirements. However, drilling in ANWAR and prospecting other sources of fossil fuels in the lower 48, is not the solution. A tremendous amount of research as been conducted over the past several decades on alternative fuel sources such as hydro, wind and bio fuels. The momentum to integrate these technologies has stalled though, given the tremendous sway that traditional energy companies and Detroit have in Washington. They have positioned these opportunities as economically unviable and destructive to the American economy. The argument can be made though that by developing and mainstreaming these solutions, we can gain a greater measure of energy independence as well as grow our economy by selling these solutions to developing nations across the world who lack natural reserves of fossil fuels and the economic where-with-all to purchase their energy supplies on the open market.

Alanna Vitucci is a contributing author to http://www.kilowattage.com ; an alternative energy blog and directory that is part of the Got-Zip Site Network.

Alanna is also the President of Cactus Blossom Communications, a full-service marketing communications firm located in Ft. McDowell, Arizona. She can be contacted via her "Off the Grid" column on Kilowattage.com

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Daniel Nickerson
Visit website