Written by Miranda Marquit
Photo:mollyeh11, Creative Commons, Flickr
Will China place stress on oil supplies -- and prices?
Even as Big Oil searches for the next "big" oil discovery, something new could put a strain on oil supplies. While economic concerns here at home are forcing oil prices a little lower, some think that China might have a large role to play in the future. Oil prices briefly breached $100 a barrel last week, and are currently sitting at above $97 a barrel. $100 oil became a reality last week, and is likely to become a reality again in the future. But not because of tensions in the Middle East (although continuing upheaval won't bring oil prices down). Paul Krugman points out the following about China and oil:
Even now, China accounts for about only 9 percent of the world's demand for oil. But because China's oil demand has been rising along with its economy, in recent years China has been responsible for about a third of the growth in world oil consumption. So, with oil discovery on the decline and demand on the rise, a very real problem could be in the near future. This is why some feel that Sinopec (SHI), the Chinese state-run company, as well as other Big Oil companies, could be a good bet in terms of investing.
Others, however, feel that Big Oil's time may be approaching. Big Oil continues to earn record profits, and consumers are tired of seeing gas prices rise at the same time. Sympathy for companies like Exxon (XOM) that don't work toward finding alternative energy is waning. Could rising oil prices result in a green backlash that leads to rising stock prices for solar and wind power companies? The next couple of years could tell.
Disclosure: I own none of the stocks listed above.
Photo:blizzy78, Creative Commons, Flickr