China And Its Consumption of Oil Will Continue To Grow

On today's FinancialSense market wrap, market commentator, Tony Allison wrote an interesting passage on China and its automobile market in his essay, The Great Oil Bubble? Supply and geopolitical issues will not go away in global recession

• It’s 1915 in China
  
  The year was 1915 and a young and growing America was just beginning to fall in love with the automobile. That year there were 9 privately owned vehicles per 1,000 Americans. That is precisely where we find China today as it begins its own love affair with the automobile. The difference of course is rate of change and scale. China recently passed Japan as the second largest automobile market after the US. Astoundingly, China did not begin encouraging private car ownership until 1994. Even more amazing, 37% of people driving in China today did not know how to drive 3 years ago! (The death rate from accidents per 100,000 cars is 4.5 times the US rate.)
  
  With a middle class already estimated at nearly 300 million people (21% of total population), it is only a matter of time before China will have more cars than any country on the planet. On the luxury side, China is already the #1 Rolls Royce market in the world, with the most popular model selling for a cool $397,000.
  
  As the financial system grows and gains acceptance in China, it will open up more opportunities for Chinese citizens to buy cars on credit. In a Chinese car ownership survey, 96% of respondents said they paid cash for their cars. As this nation of hardworking people begins to taste the convenience and freedom of automobile ownership, there is no turning back, even at higher fuel prices. The global demand for gasoline will grow rapidly as car ownership becomes more commonplace in China.
  
  China now imports over 4 million barrels of oil a day, roughly the same as Japan. Despite a major production effort, China’s crude oil output is forecast to rise only 1.1% in 2008 to 189 million metric tons. This is down from a 1.6% increase in 2007, according to the Chinese Petroleum and Chemical Association. The implication is for continued growth in imported oil, even if the economy slows from its current double digit growth.