Today the world is nothing if not global in its outlook, indeed it has officially become ‘globalised’. For better or worse, depending on your viewpoint, it has succumbed to the ongoing march of ‘globalisation’. This process has been a continuous trend over the course of the past two decades and today there are very few boundaries to global trade, the movement of people, information and of course, communication. The world has become integrated, assimilated and historically a more singular entity than ever before.
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This ‘connectedness’ presents a serious dilemma in the current global economic climate. For the global economy to maintain forward momentum in 2012, China must continue to achieve near double-digit growth. However, with the Eurozone teetering on the edge of recession, and with the prospect of years of stagnation and decline within Europe, China’s prospects could be severely harmed as much of its future growth potential relies on a strong export market. The International Monetary Fund (IMF) has already lowered its annual growth forecast for China from 9% to 8.2% with the warning that a severe downturn in Europe could lead to a further drop of as much as 4%. The impact on the global economy would be severe with Western companies already heavily reliant on Chinese demand for their products in the face of economic weakness within their own domestic markets. Their predicament would only be exacerbated as Chinese vendors looked to establish alternative markets abroad. Whilst the Chinese government would no doubt attempt to counteract any such marked decline in growth with an aggressive fiscal stimulus programme, it is not difficult to speculate how such a tightly integrated global economy could plausibly grind to a rapid halt.
The strength of Asian demand and in particular Chinese demand, will be equally important to the global oil sector in 2012. Last year saw Asian oil demand increase by 720 000 bpd in stark contrast to a declining picture in both North America and Europe of 310 000 bpd and 260 000 bpd respectively. These figures come from the International Energy Agency (IEA) who predict that Asian oil demand this year will grow by a further 840 000 bpd, representing over 70% of the world’s total oil demand growth.
In order to source this escalating supply and in a further example of growing globalisation, China is becoming increasingly dependent on energy imports from overseas. BP’s ‘Energy Outlook to 2030’, asserts that China will have to import 80% of its oil and 42% of its gas by 2030. This will inevitably lead to questions of energy security as China competes for its oil needs on the open market.
Ironically, as China becomes more dependent on energy imports, North America will become largely self-sufficient over the same period as it harnesses its vast unconventional resources. This would have been unthinkable just five years ago but in this short timeframe the US has overtaken Russia to become the world’s largest gas producer and looks also set to repeat its shale gas success in the shale oil sector, boosting domestic oil production.
Whilst the trend to globalisation is clearly entrenched in economic terms, and it remains to be seen how this will play out over the course of 2012, it is nonetheless extraordinary to see the about turn in US energy fortunes: from globalisation to ‘localisation’ or ‘domesticisation’ or ‘backyardisation’ or whatever buzzword you care to invent, it will have the same hugely positive impact on the US economy for the foreseeable future because a secure energy supply and economic strength are inextricably linked.