China increase pumps up world oil price
An attendant pumps gasoline at a PetroChina gas station in Shanghai.
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TESS VIGELAND: While you were sleeping last night, the average price for gas in this country rose a cent and a half to $2.91 a gallon. But that's nothing, when you consider that Chinese citizens awoke to a 10 percent hike in prices at the pump. Analysts say that, in turn, is one big reason world oil prices breached $96 a barrel today. Marketplace's John Dimsdale explains the cause and effect.
JOHN DIMSDALE: China is already the world's second largest importer of foreign oil, and it's gaining fast on number one, the United States. To keep a lid on inflation, the Chinese government has shielded drivers from the rising cost of oil. Some analysts expect China's hike in fuel prices will eventually slow consumer demand, and ease the upward pressure on global oil prices. But Donald Straszheim with Roth Capital Partners doubts it.
DONALD STRASZHEIM: You could raise the price of gasoline by 50 percent in China and the demand side wouldn't move a lick. Just like Americans, they want to work, earn and consume. The automobile is an important part of their evolving economy. There is little chance that the demand for gasoline is going to slow anytime in the next decade.
As evidence, Straszheim points to the U.S., where $3 a gallon gasoline has made little dent in demand. Analyst John Kingston at the energy information company Platts, says not only is China's growing appetite for oil driving the global price; it's swamping fuel efficiency gains in the U.S. and Europe.
JOHN KINGSTON: It basically wipes out all the efforts that anybody who might be listening to this has taken by slowing down or changing their light bulbs. It's very good that you've done that. But by the same token the Chinese have just eaten up your savings.
China imports nearly four million barrels of oil every day, and that's expected to double in eight years.
In Washington, I'm John Dimsdale for Marketplace.