Much is said about China's growing oil demand with consumption in China up +250% over the last four years. China is in a very strong growth mode with GDP pegging somewhere in the +10% range on an annual basis. This is very strong and in a mature economy would be unsustainable. However, China has several things working for them, which will continue to keep demand high.

First they were preparing for the 2008 Olympics and building that infrastructure has been a big priority. While that effort does require energy including oil it is not the biggest factor in China's surging oil demand.

China is rapidly moving from an agrarian society into an industrial/technological society. China has 1.3 billion people and most of them live in the country. Because of the recent changes in China's economy and government there are nearly two million people per month moving into the cities. Typically these are the 20 somethings that grew up on the farm and are looking to break with tradition and get a job in the city. Just housing this influx of workers is a huge problem for China's government and there is a build out in progress of major proportions. This is not about to slow for many years to come. They have to provide jobs and housing or the conditions will deteriorate into a rise in gangs, violence and street theft. This flight to the city is producing a higher birth rate in the country as farm workers are typically children of the farmer. With the workforce headed to the city the farmers have to grow more workers. Seriously!

For those already entrenched in the city and reaping the benefits of entrepreneurship they are moving up the social ladder to better housing, starting families and consuming more products. One of those products is a car. Of the 1.3 billion Chinese only 9 out of every thousand have a car but that rate is growing rapidly. China was on track to build over 800,000 cars a month as of Jan-2009. By the end of 2009 they will be producing over 1 million vehicles per month. The oil consumption demands of adding 10-12 million cars a year is staggering and it will only get worse. China currently limits the number of cars imported into the country in an effort to slow the congestion until roads and infrastructure is better able to handle them. For instance there is very little parking available and the additional cars are becoming a major problem for the cities.

While most analysts are only concerned with the GDP and the surface consumption of oil there are many problems not covered here that influence that demand. China has very little oil consumption on a per capita basis. To put into perspective each American consumes a little more than 26 bbls of oil per year. China's per capita consumption is only 1.6 bbls per year. With 1.3 billion Chinese rushing to join the 21st century and enjoy the benefits the rest of the world takes for granted that consumption is likely to grow very quickly. When you barely use any oil it is very easy to double and triple those requirements.

The world currently produces and consumes about 3.2 billion barrels of oil per year (87 million barrels per day) and that is very close to the current limit of our production capability. If the average consumption in China only rose by ONE BARREL per person per year that would mean an increase of +33% in demand. There is no possible way for world oil production to increase +33% in a year, ten years or ever. There is also no way to stop China's consumption from growing. It may slow but it will not stop. Current estimates for China's oil demand was to increase +8.1% in 2008 and over +10% in 2009. That is about seven million bbls per month. Even if the demand growth was only half what is expected at 3.5 million additional bbls per month it will put a severe strain on demand and availability of oil on the market. That is just for 2008-2009. China should continue to grow at the present rate through 2015 according to analysts. Do the math!

See the comments on India for further complications related to the 1.1 billion Indians trying to upgrade their standard of living and increase their meager 0.8 barrels per year of consumption. India, the Awakening Giant

If this analysis does not produce fear about the future of oil prices for any rational individual then I have failed in my presentation. There are some real problems in our future and the least of it will be worrying about China's oil consumption. China's government is already worrying about it and they have the clout to handle the problem.

See the comments on the "Coming Oil Wars" for a view of the future. Coming Oil Wars

When it comes down to a bidding war for the remaining available oil you can rest assured China will be heard. Actually the Chinese government has already taken a proactive approach toward obtaining oil for decades into the future. The easiest way of insuring you have oil in the future is to buy it now. To actually buy the oil fields and/or the companies that owns them. If the oil belongs to you there is no reason to compete for it on the open market. China made the headlines recently with its failed acquisition of Unocal but that is small potatoes compared to what it is planning. China has partnered with Venezuela and the rabid anti-American Hugo Chavez. China is investing millions into Venezuela infrastructure as part of an agreement to get increasing amounts of oil from that country. Chavez would like nothing better than to have an alternate consumer for his production and leave the U.S. hanging in the breeze. China has agreed to be that consumer and is making the investment to protect their future supplies. It is only a matter of time before Chavez cuts our lifeline to Venezuela oil.

China is also trying to buy owner/operators in the Canadian oil sands projects. China has tried to acquire the Northern Lights Oil Sands Project. This same scenario is playing out around the globe and most analysts are asleep. The predominate thought process is that it will not change anything other than the direction of the tankers. They believe that China will just continue to buy and sell oil like any other country leaving the global supply and demand channels more or less intact. What they fail to realize is that China is not just buying oil for resale but trying to buy the assets of the various oil companies or contract for all the output for decades in advance. Every asset they buy is removed from the global market supply. It is no longer up for bid. They realize that their country is growing and a lack of oil will seriously stunt their growth. They must have oil to survive and like oxygen it is not an optional nutrient.

Americans must realize that the global oil environment is about to change drastically and we are currently sitting here fat, dumb and happy in total denial. Don't be the person that pulls up to the pump at $5 a gallon and think, Dang, why did I not prepare for this? China is prowling about like a bear seeking those whose oil assets they can devour. They are doing it quietly but they are doing it. Hardly a week goes by without another small mention of some oil asset China is buying or bidding on. Don't let high oil prices sneak up on you.