| The current rise in demand for oil
in China and India are driving up oil prices globally, especially in China in
preparation for the Beijing Olympics. In its May 19, 2008 edition, The Wall
Street Journal reported "China imported 520,000 metric tons of diesel in April,
up from 30,413 metric tons a year earlier..." The question is if the Chinese
demand can be sustained, or is this a blip before the Olympics?
The fact is that China is not only hording fuel to
build the Olympic venues, of which the building pace has become a torrent in
the past year, but also to build a stockpile of fuel to power the diesel
generators for the electricity needed at the Olympics. This is because China
does not have a sufficient permanent energy infrastructure to power the Beijing
or their nation in general. Meanwhile, China is stockpiling diesel fuel to make
sure they won't run out, and once that hording stops after the Olympics, a glut
of diesel fuel will hit the world market, thus prices will drop.
While China is rushing to finish the construction
projects on time, one must wonder if China has any projects in the works which
can sustain their construction industry after the Olympics. Once the Olympics
are over, the former Olympic village will be vacant virtual city, the place
where the world's top athletes lived and news agencies reported from. This
means an instant glut of housing, hotels, food services and office space, all
in a country that may not be able to absorb those venues into their economy
quickly enough to sustain the rampant economic growth leading up to the
Adding to this problem are the many
stadiums and other sports-specific structures which will go empty, and the
diesel power generators will be idled. After the Olympics in Las Angeles, the
main stadium became Dodgers Stadium, thus there was a planned usage for the
facility. After the Olympics in Colorado, ski resorts opened, thus also
utilizing the hotels built for the Olympics and creating a tourism Mecca.
China, on the other hand, is more interested in
their "coming out party" than they are practicality or economics, as the
Chinese government cares more about their image at the Olympics than anything
else, even to the point of forgoing the safety of their workers and guests.
(See China Olympic Venues May Be Deadly at
While China still needs to rebuild after the recent earthquakes there, those
structures are relatively small, and with the expected economic slowdown in
China after the Olympics, China is likely to only rebuild damaged and destroyed
structures to pre-earthquake levels. Even if China could employ all the Olympic
construction crews on that endeavor, it would still be a short lived project
which would eat all of China's Olympic cash flow gains.
Still, the Olympics are likely to reignite the
boycott-China calls we saw during the Olympic torch run. Those boycotts will
most likely result in a 2% third-quarter drop in profits at Wal-Mart and other
major importers from China, but these companies will still remain profitable
because Americans still demand the low price of imports.
It is important to note that the current high demand
for oil in China and India are primarily the result of American demand for
cheaper foreign goods, as the foreign economies we created are now poised to
sustain steady growth on their own. These economies now inherently have an even
greater internal demand for growth of their standards of living and overall
economy, thus fueling an even greater demand for oil. So, when you buy that
discount-priced foreign-made jacket, remember that there will be an even
greater cost down the road, just as we are paying the rest of the cost of what
we previously purchased from overseas in the form of higher gas prices, as
evidenced by the new demand of diesel fuel in China and India. Let's face it -
you have already paid for the Beijing Olympics at the gasoline pumps.