China’s Astonishing Rate of Oil Consumption
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According to BBC News, China’s demand for oil jumped by an ‘astonishing’ 28% in January compared with the same month a year earlier. As the headline tells us, China’s consumption of oil is skyrocketing as it tries to fulfill the energy hunger engendered by rapid economic growth. There are many concerned voices that this ‘astonishing’ (for some, ‘horrifying’) consumption of oil could stir up several ecological and economcial problems.
First off, many are concerned that this incredible rate of oil consumption will eventually result in depletion of oil. The concern for the depletion of oil was an old issue for industrial countries, however, this issue recently became an hot potato because of China’s increasing consumption of oil. Some analystist say that as China’s consumption of oil increases tremendously the world supply of oil can be depleted earlier than expected. It would certaintly stir up sever problems if the supply of oil depletes. It might be difficult for both developing and developed countries to even sustain itself.
Secondly, China’s tremendous consumption of oil has several negative externalities. For example, it could emit tons and tons of CO2 in the atmoshpere which in turn will aggravate the global warming. In the graph above, the external cost to the society is not reflected in the current oil market price. It is at the curve of MPB, which should be at MSB. In my opinion, even though the market price for oil reflects the external cost and the curve on MSB, China’s consumption of oil is so high that it will do no good.
As you see in the graph above, the demand for oil is much higher than the supply. The demand is always higher than the supply and that is why market price of oil is high (about 80$ or above for a barrel). However, with higher demand by China, the price for the oil will increase significantly. Therefore, with extremely high market price for oil, many developing countries (other than China) will have a great difficulty in their economic growth and development. It will also affect the developed countries by some extent. In my opinion, the countries importing oil, like Japan, will be hurt the most.
In conclusion, China’s increase in consumption of oil could stir up many problems such as depletion of oil, global warming, and high market price for oil.