According to figures recently released by the International Energy Agency (IEA), in 2009 China became the world’s largest energy user, consuming 4% more energy than the US, a total of 2252 billion t of oil equivalent. To put this substantial hike in energy consumption into some context, just 10 years ago the US consumed twice as much as China. Today Chinese oil consumption is rising at a rate of upwards of 25% per annum. However, many within the energy industry have become somewhat anaesthetised to startling pronouncements about the phenomenal growth of China. Such facts and figures have largely become routine.
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So it was somewhat refreshing and made a change to read in the Financial Times this week, that China has overtaken both the UK and Germany to become the top global importer of Bordeaux wines. The article went on to report that wine sales to China and Hong Kong, specifically Bordeaux, have doubled year on year over the course of the past five years, to a current level of € 90 million (US$ 118 million). Whilst the author was not suggesting imminent worldwide wine shortages, the growing popularity of this beverage amongst Chinese entrepreneurs over their traditional domestic liquors will surely lead, at current growth rates, to concerns over ‘security of supply’ and ensuing price increases in the not too distant future.
This provides a neat illustration of the pressures exerted by China’s rapid growth on the global supply chain as a whole. China’s voracious appetite, and it is by no means unique as this applies equally to a raft of other emerging economies, is causing a fundamental shift in demand patterns. This is being felt across the commodity sector as a whole be it coal, natural gas, iron ore, rare earths, copper, aluminium, foodstuffs and of course wine.
Crude oil is one such key commodity and to some extent, the recent BP Macondo oil crisis in the Gulf of Mexico is symptomatic of this dilemma and should perhaps serve as a stark warning to the dangers ahead. Intense worldwide demand and the prevalence of resource nationalism is driving major oil and gas companies to search and develop new resources in ever more challenging environments be they deeper offshore, in the high arctic or in regions of political instability. Whilst oil prices have remained comparatively stable over the course of the last couple of years, a recovering global economy will surely lead to greater demand and rising oil prices, rapidly increasing the pressure across the entire oil and gas supply chain.
As ever, the way ahead for the industry as it comes to terms with the fallout of the Gulf of Mexico oil spill looks set to include a fair share of ups as well as downs, but in the meantime, with the popularity of French wine on the increase in China, why not lay down a couple of bottles in your cellar whilst it is still available? Even if you don’t drink it, it might well prove a good investment.