Africa's Oil, China's Investment

China’s economic growth is heavily reliant on oil, and not just from Saudi Arabia. China has diversified their investments and has reached into Africa’s market, home to one third of the world’s commodities.

In 2009, China became the second largest importer of oil at 4.3 million barrels per day, behind the United States at 9.6. According to the United States Energy Information Administration (EIA), “EIA forecasts that China’soil consumption will continue to grow during 2010 and 2011, with oil demand reaching almost 9.6 million bbl/d in 2011.” Oil-expert Daniel Yergin punctuated the EIA’s assessment, “But now, the growth is in China, India, other emerging markets, and the Middle East. Between 2000 and 2007, the world's daily oil demand increased by 9.4 million barrels. Almost 85 percent of that growth was in emerging markets.”

Along with oil usage, comes oil reserves. A 2009 China Daily article indicates China is working to increase their oil reserve capacity, “The program will increase China's strategic crude reserve capacity to 44.6 million cu[bic] m[eters], or 281 million barrels.” At full capacity, 281 million barrels divided by a 4.3 million barrel daily usage is roughly 65 days of oil in strategic reserves.

These plans are not yet complete, and if 281 million in reserve is optimal capacity, we can assume their reserves, in terms of days, is much lower than 65. This assumption was confirmed by the head of the State Bureau of Material Reserves under the National Development and Reform Commission, Wang Qingyun, who indicated that China has enough reserves for a month.

In order to build up their reserves, China will have to import from and invest in Africa. China’s investment strategy is a simple one: China will build infrastructure in exchange for oil. Bloomberg indicates, “China’s investment into Africa may rise by 70 percent to $50 billion by 2015 from 2009, as the Asian nation seeks to acquire resources, Standard Bank Group Ltd. said. Bilateral trade between China and Africa will reach $300 billion by 2015, double the 2010 level, Africa’s largest lender said today in a report.”

Martyn Davies, Director of the China-Africa Network said, “They are the biggest builders of infrastructure. They are the biggest lenders to Africa, and China-Africa trade has just pushed past $100 billion annually.” Current growth trends, 10 percent a year, do not augur slowing investment. Although, Chinese investment in Africa has been met with some domestic resistance, i.e. Algeria, Nigeria, and to some extent Angola – they appear to be cultivating many more relationships (Latin America) with the foresight that African relationships, historically, have not always been sustainable.

The question for the United States is: how to respond? If economic growth is tied to access to oil, and oil resources will eventually dissipate, then conflict or cooperation lay ahead. The United States, by virtue of investment in the Middle East, is ultimately in the same quandary as China. This should be a sort of enlightenment for both governments to invest together in other renewable forms of energy – not compete for oil.

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