Thank You, China Mobile, for Belatedly Notifying Me of Osama Bin Laden’s Death

This SMS came in at 2:59pm on Monday, May 2:

新闻早晚报快讯:美国总统奥巴马1日表示,美军方当天对巴基斯坦一所建筑发动袭击, 打死了“基地”组织领导本·拉丹,并对其尸体进行了确认。新华社

News Alert: On May 1st, United States President Obama said that earlier in the day U.S. military forces had attacked a building in Pakistan, killing Al Qaeda leader bin Laden and confirming the identity of his corpse. Xinhua News Agency

Continue reading “Thank You, China Mobile, for Belatedly Notifying Me of Osama Bin Laden’s Death”

John McCain’s Oil Slick Calculations

John McCain says that the US has 21 billion barrels of proven oil reserves, and that exploration and drilling should be opened up in areas where a moratorium restricts disallows it (Alaska’s Arctic National Wildlife Refuge (ANWR)).   This is one of the ways he would respond to high energy prices in the US. 

Well, it wouldn’t.  And it’s a bad idea.

Bloomberg reported in January ’08 that worldwide oil consumption is 88 million barrels a day.  If you accept the rough math and oversimplification, and you’ll see that this means the US’ proven reserves could supply the world’s need for all of about 8 months. 

Does that sound like a lot of oil to you?  Does it sound like its worth ripping up ANWR for? And what would it accomplish?

I say it would serve to bring down the price of oil ever so slightly, ever so shortly.  And it would the typical politics of ‘give it to me now and pretend there are no consequences.’  And when that oil runs dry quickly, the crisis will be deeper and energy prices higher, and Americans will still need to get off oil.  I really hate that about high level American politics.  (Obama/Deomcrats are just as bad or worse, his pandering theme this week in Wisconsin is “Change that Works for You“).

If McCain wants to be a leader on this issue, he should be focusing more on how to really bring energy alternatives to market quickly.  And if those alternatives can’t be brought about quickly, then I’d like to see the US hold on to ANWR oil for a true rainy day.  You know, it could get a lot worse than $4/gallon gas…

China’s Oil Manipulation, Gas Prices, and US Presidential Politics

Everyone knows that China has been under pressure for years, led by the US Congress, to allow the value of its currency, the RMB or yuan, to appreciate.  But the “weak” RMB that hurts American exporters is not likely to be the main issue of concern to American voters.  They’ll be more worried about $4/gallon (or higher!) gasoline.  And this (Chinese article) is a big reason why.  China has price controls on diesel and other fuels, such that there is now an RMB6000 (US$870) disparity between what a ton of diesel goes for in China and what it goes for abroad.  Chinese oil refiners like Sinopec are getting slammed, since their costs are rising but the sale price of fuel is controlled by the Chinese government.  The government is responding with measures to import more oil to help ease pressures.

Why does China control prices?  Well, it’s obviously a good way to spur growth, and it’s been working as the country has been growing at 10%+ for over a decade.  It’s also a way to over pollute the country and congest the roads.  And it’s contributing to the skyrocketing oil prices worldwide, since 25% of the world’s population, the Chinese, are paying a lot less for the oil they use than everyone else.
SHTig adds (5/28 6:50pm PRC time): Mul called to ask what this means, and nator commented below also asking for clarity.  To answer – yes, China buys oil on world markets at prevailing prices.  But then, when that oil is sold domestically it is done so at a price lower than the prevailing world price.  The government forces Sinopec and others to sell it on the cheap, and makes up for this by subsidizing Sinopec with the difference.  This process allows everyone in China to get oil in all forms for less than the ‘true’ price, which results in more oil being consumed in China than what should be.  We expect consumption to be inversely proportional to price – and when prices are kept artificially low, consumption is artificially high.  With oil consumption artificially high in China, China demands more oil from the world markets than it should from an economic prospective and this is what adds to the upward pricing pressure on oil.

If your taxi driver had to pay the prevailing market price for gasoline, your taxi flagfall would be higher than RMB 11 (as it is in Shanghai), and you’d pay more per kilometer.  The ride might cost you 50% or 100% more, and at the margins, some people would opt to take a bus instead.  Multiply this behavior by 1,300,000,000 and remember that China is the world’s workshop, and we’re talking about a lot less oil being used, if only they – the end users – paid the prevailing price.  That would reduce global demand and thus the price of oil as well, ceteris paribus.

Wonder if John McCain and Barack Obama will talk about this when asked what they plan to do about $4/gallon gasoline?  If Chinese consumers paid the same price for fuel as everyone else, it might serve to put them on the same competitive playing field as other countries, and it might also serve to increase efficiencies within China.