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Listen to What China is Telling You – Investing in Oil Reserves Now is Critically Important

August 16, 2010 | About:
CanadianValue

CanadianValue

210 followers


Stop the presses. The United States is no longer the world’s biggest consumer of energy.

After topping the energy consumption charts for more than a century, the U.S. has been left behind as China leapfrogged past. According to the International Energy Association’s (IEA) latest report, China burned its way through 2,252 million tonnes of oil equivalent last year – about 4% more than the U.S.

That’s an astonishing turnaround, according to IEA chief economist Fatih Birol, who noted that as recently as 2000, the U.S. consumed twice as much energy as China.

A new age in the history of energy has begun, and the implications are enormous. China may not want to accept the honors, but the reality is that it’s now the most important player on energy’s demand side.

According to the IEA report, China will be investing more than $4 trillion over the next 20 years to ensure there are no power or fuel shortages, and that there is enough energy to keep feeding its economy. Thus the ever-increasing number of ships steaming out from Canadian and Australian ports: all are bound for Beijing, all loaded with precious energy supplies.

Beijing continues its relentless courting of oil-rich countries across the globe. Its national oil companies (NOCs) offer debt forgiveness, development packages, infrastructure improvements, and, yes, bribes, in exchange for secure oil contracts, especially in Africa. The net overseas production from the three Chinese NOCs for 2010 will be a record-breaking 1 million barrels a day which interestingly is enough to fuel all of Australia.

China has not ignored North America. It’s heavily invested in the oil sands of northern Canada. This huge reserve is likely to become the most important source of U.S. oil, and China is making sure its finger is very firmly in the pie.

The U.S. still remains the number one consumer of crude. But over the past three years, China has accounted for at least a third of world demand growth in crude. And with a projected 45% increase in demand in the next five years, Chinese National Oil Companies won’t be slowing down anytime soon.

The Chinese aren’t racing around the globe securing as much future oil supplies as they can for no reason. They are doing it because they know that their oil demand is growing rapidly and because they know that the world is already bumping up against its peak level of oil production.



So should you happen to tune into CNBC and hear the market pundits claiming that oil demand is weak and that we are awash in oil, keep in mind that they are talking only about the United States. And it isn’t the United States that is driving oil demand growth. It is China, India, and the Middle Eastern Oil producers themselves that are consuming more and more oil every month as they move their populations towards a higher standard of living.



Do yourself a favor and read more on this subject. It isn’t a difficult concept to grasp once you see that large oil discoveries peaked in the 1960s, understand that the production from these big oil fields decreases by 5% or more every year and that we don’t have big oil fields in the pipeline to replace them. It is essentially a treadmill that we are running on where the speed keeps increasing every year. We aren’t running out of oil, we are just running out of oil fields that produce at the prodigious rates of the super-giant fields of years past.



Here are some investing ideas that will add oil exposure to your portfolio on the cheap:

Stone Energy

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ATP Oil and Gas

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Cobalt International

http://www.gurufocus.com/news.php?id=101391

Petrobakken

http://www.gurufocus.com/news.php?id=103978

Enerplus Resources

http://www.gurufocus.com/news.php?id=99294

About the author:

CanadianValue
http://valueinvestorcanada.blogspot.com/

Rating: 2.1/5 (9 votes)

Comments

rgosalia
Rgosalia - 4 years ago
I would add 'Twilight in the Desert' by Matthew Simmons. This was one of the Bob Rodriguez's recommendation in his Sept '06 letter to shareholders. Matthew Simmons is a Houston based investment banker who specializes in this field. He presents a field-by-field analysis of Saudi's oil fields and highlights the discrepancies between actual production potential and the extravagant resource claims. His analysis is based on the SPE (Society of Petroleum Engineers) papers and presents it in a very readable format.
halis
Halis - 4 years ago
"Twilight in the Desert" is excellent, I also recommend it highly.
LwC
LwC - 4 years ago
IMO you, CanadianValue, are a phony. Not only have you posted a message in another thread started by you in this forum and then responded to yourself under the guise of another alias to praise your own work, but now you are seen to be publishing an article that presents another's work as your own. Here is the proof:

08/05/2010

China Is Winning the Energy Race

By Marin Katusa, Casey’s Energy Opportunities

Stop the presses. The United States is no longer the world’s biggest consumer of energy.

After topping the energy consumption charts for more than a century, the U.S. has been left behind as China leapfrogged past. According to the International Energy Association’s (IEA) latest report, China burned its way through 2,252 million tonnes of oil equivalent last year – about 4% more than the U.S.

Link: http://www.caseyresearch.com/articles/3563/china-is-winning-the-energy-race/

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