With their economy still trucking along, the Chinese are rapidly building new oil refineries, boosting their output of gasoline, but also signaling they may soon overtake the United States in oil demand.
China's economy has been posting solid gains for years as the United States becomes more reliant on Chinese cheap labor and supplies for its own economy. The downside is that China's economy has improved so much that its appetite for gasoline and oil products is also making double digit gains.
A huge concern is the breakneck pace that the Chinese are opening new oil refineries. This is a concern because it signals the Chinese are beginning to rely more on oil and gasoline products, and with their 1+ billion population, the consequences could be dire for all motorists outside that country. (SEE GRAPH- if you can't see the graph, visit
the GasBuddy Blog to see it.
Over the next five years, the Chinese will open 20 new refineries, with proposals for another 10 by 2020. The capacity of the 20 planned units totals 3.3 million barrels per day, while the 10 additional facilities proposed would put out 2.34 million barrels per day. If all 30 facilities open, they would amount to nearly 5.7 million barrels per day, or nearly a third of U.S. refineries have the capacity to run.
With the large expansions and new projects, obviously there will need to be a lot more oil flowing to China. If OPEC doesn't start to ramp up production of oil, there may be pressure on the limited supply produced by oil producing nations, ultimately driving prices up not only here, but around the world.
While the United States and Canada don't really need more refining capacity, what we could be doing is continuing to build our oil inventories while prices are relatively cheap. I expect that once our economy regains traction we will again see oil prices sustained over $100 per barrel as pressure from growing countries for part of the limited supply of oil pressures prices higher.