Comment Post

This is a link to the blog I commented on:

http://healthcareprosandcons.blogspot.com/2009/10/flaw-in-plan.html#comments

China's Invisible Oil Hand

Over the past few months, China has been on a crusade like mission to secure resources across the world. And recently, the Wall Street Journal published that China now imports 8% more oil now form last year, but at the same time, removing subsidies on oil. Both the increase in imports and decrease in subsidies does not mean demand is higher, all it means is supply is increasing. So although subsidies are removed, prices can stay the same all attributed to the Chinese Government in the background buying more oil and manipulating the price per liter.

As you can see from this chart from The Economist, prices in China are still higher than US prices which I might add, are affected by tax breaks given to American oil companies. And looking back to 2008, The Chinese held prices below that of the US, which "encouraged [Chinese] households and firms to guzzle more oil, pushing global prices higher."

Some benefits of this system is that it stabilizes growth and when oil prices in the market get too high, the government is able to make the price of oil more affordable to the average consumer.

The downside to this method is that artificiality dictating prices in such a large country greatly affects oil prices in other countries, as well as violating basic economic principals of free trade (but we won't get into that).

Do you think what China's manipulation of the oil price is beneficial to the growth of a country or do the downsides outweigh the benefits? Please comment.

http://blogs.wsj.com/environmentalcapital/2009/10/14/oil-prices-knock-knock-knocking-on-75-thanks-to-china/

http://www.economist.com/businessfinance/displaystory.cfm?story_id=14462395

http://www.nytimes.com/2009/10/22/business/energy-environment/22crudeoil.html?ref=global

More Wind = More Coal

The Chinese government has planned over 12.7 gigawatts of wind power to be built in the next six years alone. However, China now faces the problem of what to do when the wind doesn't blow. In order to have a secure flow of energy for the booming cites, an additional 9.2 gigawatts of coal energy is going to have to be produced.

This is ironic on multiple levels. China has been promoting itself as a proponent of green energy recently and to have nearly 75 percent of the wind power capacity needed to be backed up by coal, it gives the world the impression that China is not doing its homework on where to strategically place wind farms. Like I said in my previous post, almost 30 percent of China's wind power generated in 2008 wasn't connected to the grid! Having a surplus in some places and a shortage in others is the perfect example of why China's top-down approach to their green revolution is severely flawed.

Insights? Comments? Please share.

WSJ
http://online.wsj.com/article/SB125409730711245037.html

China's Wind Energy Situation