Summary
China's energy demands are increasing at rates faster than they can locate energy markets.
The US' energy demands are also on a continuous rise, without any one importing country's supply filling the supply/demand gap.
Two 'friendly' countries are fighting for the same markets, who will win in the end?
Analysis
China is the world's second largest energy user and the fastest growing economy this century so far. The country needs energy to fuel its economy, as well as its people. While China is blessed with an abundance of coal, that alone is not enough to quench the country's growing thirst for energy; mostly imported from other producing OECD and non-OECD countries.
The impact of this? China is taking away not only existing, but also emerging markets the US was eyeing in order to deal with its growing energy crisis. The US has been forecasting and 'dealing' with its energy shortage issues; China on the other hand is just now playing catch-up, and scouting the world for solutions to deal with its current and forecasted energy demands.
With terrorism playing a role in supply forecasting, and political quibbles growing amongst countries, where do you find abundant, yet industry-friendly rules for exploring for new sources of energy besides Canada? Russia of course!
The Russian energy markets have been booming, mainly due to the increase in demand from European customers. However, that country also exports its resources to various other countries throughout the world, including China and the US. The latter two have been competing for Russia's resources for three years now. Both China and the US have invested millions of dollars in developing Russia's industry, updating its infrastructures, and providing the technical knowhow necessary for successfully growing its markets. For what in return you might ask? For low-rate energy exports of course!
Energy in Russia has become a currency of its own, whereas the highest bidder (meaning the country offering the biggest export opportunities) comes out on top; in this case China. Why you might ask? Politics is speculatively one of the major reasons.
Politics play a major role in the export decisions of energy-producing countries, and Beijing does not have many enemies threatening its economy. The US on the other hand is always on alert, and the fact that its GDP is not expected to grow as fast as that of China, is yet another factor.
China: the slowly approaching Tiger is ready, willing and capable of affording to scour the world in search of solutions to its growing demand for energy. Whether it is finding the best countries offering technological advancements to drill for Coal Mine Methane (CMM) or having a stake in Russia's emerging energy markets, China is determined, meaning announcements like this are only the beginning.
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
