At a recent event hosted by the Hudson Institute, energy professionals gathered to discuss energy issues affecting both the United States and China, with significant discussion centering on how low oil prices generally correlate with economic prosperity and stability – and vice versa. It is projected that China’s oil import dependence will rise from 60% in 2013 to 75% in 2035 and that, in the next 15 years, China will overtake the U.S. as the world’s largest oil consumer. Like the U.S., China’s sustained economic growth is directly influenced by the price of oil.
Although crude oil price spikes are inevitable, panelists said that downward pressure on prices will help both countries achieve sustained long-term economic growth. These low oil prices can be maintained in both China and the U.S. by reducing their dependence on oil imports and by crafting domestic energy policies that mitigate against price volatility. In addition, some panelists observed that cooperative policies must take into account the energy similarities between the U.S. and China, such as:
•Both countries are the world’s largest oil importers and, due to hydraulic fracturing, they will also become large oil producers;
•The U.S. and China have large market potential for oil replacement products like ethanol and methanol;
•Both countries have an interest in global stability and global growth
•Citizens in both nations are very concerned about air pollution; and
•Neither state prioritizes long-term climate change policies. Coal is expected to remain a primary source of energy in China and the U.S. has shown limited willingness to finance climate change programs.
While China and the U.S. often find themselves at opposite ends of a negotiating table, energy is an area where there may be an opportunity for the countries to work together on energy issues. By developing cooperative policies that utilize each state’s strengths to mitigate price spikes, both China and the U.S. have the opportunity to cooperatively pursue sustained economic growth.