Question: China's Thirst for Gas: Hurricanes in the Gulf of Mexico, deteriorating pipelines in Alaska, and conflict in Iraq can cause gasoline prices to rise by restricting supply. Often the events we see in the headlines affect the supply of oil available to consumers, but changes in the level of world demand for petroleum products also affects the price of oil.
China's Growing Demand: U.S. demand for petroleum products has been high for decades. The United States is the largest consumer of oil, using about a quarter of the world's petroleum. This is quickly changing. Emerging nations are becoming thirsty for oil, and China is at the top of that list. How did such a rapid change happen? In the past, China has not needed much petroleum. As the country is industrializing, however, it needs more and more fuel to satisfy its growing energy needs. In fact, as the graph of oil consumption between 1995 and 2025 shows, China's consumption is increasing much more rapidly than U.S. consumption.
While China still consumes considerably less petroleum than the United States, it has been responsible for over 25 percent of the growth in world petroleum consumption since 1994 and 30 percent of growth since 2000. This increase was enough to make China the second biggest consumer in the world market in 2003, and its demand is not expected to slow down soon.
Worldwide Impact: China's growing energy needs have worldwide repercussions. The nation's increasing demand has helped to push up prices for crude oil. In 2005 the International Monetary Fund (IMF), which promotes economic growth and cooperation, expressed concern that high oil prices could bring about a worldwide slowdown in economic growth because of these increased energy needs.
What Does It Mean for You?
Why should you care whether China is increasing its demand for petroleum? Simply put, any increase in demand for oil on the world market can lead to rising prices for a variety of goods and services in the United States because so many other products are linked to energy costs. The results of all these increased costs are manifold. You may see a cut in school programs to pay for higher transportation costs. The products you buy in stores may become more expensive. And of course the price of gas you put into your car may increase. If you are on a limited or fixed budget, like most students, such increases will leave you with less money to spend on other things. As you see, China's higher demand for petroleum has a direct impact on you and your wallet.
Analyzing the Issue Question
1. Identifying Why has China's demand for petroleum increased in recent years?
2. Describing What is the effect of increased oil prices on your or your family's budget?
3. Applying Check your local newspaper, news magazines, or Internet news sources for recent reports about global issues affecting oil prices. On a separate piece of paper, summarize the issues discussed in these articles and describe how they affect you.