How much longer will there be a Petrodollar?

Fueling The New World Order: Where Does China Import Its Crude Oil From?

Tyler Durden's picture

 by Tyler Durden on 04/20/2014 

It was roughly half a year ago that China officially surpassed the US as the world’s largest importer of oil. Since then, there have been some rather dramatic changes in the global geopolitical landscape, perhaps the most important of which are the ever louder and bolder attacks on the US petrodollar and the reserve currency status of the US dollar which funds the global crude trade. As reported recently, Russia and China, not to mention India and Iran and the other BRICs, are increasingly pushing for a trade system in which the USD is isolated – a key precondition to the loss of reserve status.

However, as China’s ravenous appetite for oil surpasses that of the US which is enjoying an unexpected, if transitory, boom of shale oil production, which according to some experts may have already peaked, it means suddenly China is far more are the mercy of its core suppliers – the same way that for decades the US had no choice but to be best friends with Saudi Arabia, at least until Canada became the biggest supplier of crude to the US by a huge margin.

So which are the countries that China relies most on for its daily energy importing needs? The map below has the answer.

Or, in ranked format (for 2011):

  1. Saudi Arabia
  2. Angola
  3. Iran
  4. Russia
  5. Oman
  6. Iraq
  7. Sudan
  8. Venezuela
  9. Kazakhstan
  10. Kuwait

Saudi Arabia on top makes sense, but #2 for… Angola? Well, at least that explains this: “Guess The World’s Most Expensive City“…

Also looking at the map above, it is quite clear that if one were so inclined, halting seaborne trade routes at the Strait of Malacca would hobble the entire Chinese economy overnight, something the Chinese leadership is surely aware of, and is certainly considering alternatives to, such as land pipelines into Iran (via India), as well as Kazakhstan and Russia.

So how do these compare with the outside sources of US crude?

Quite clearly, the primary external provider of US energy needs is no longer Saudi Arabia, but Canada, which is now exporting more than double the bpd amount as the second largest oil exporter, one time US bff in the middle east, Saudi Arabia.

Curiously, as Canada’s dominance has soared, the influence of all the other traditional petrodollar countries has waned. But only for the US – as the first chart shows, their influence is far greater now when it comes to China.

So isn’t it only logical that it is only a matter of time before the New (Oil) World Order decides to eliminate the USD – an anachronism from when the US relied first and foremost on just these oil exporting countries – entirely from the oil trade, and moves on to the Chinese Renminbi. Of course, that would require the Chinese currency to be flexible and convertible, something it certainly isn’t now… but what about 1 year from now, or 2 years or 3? And how long before the PBOC also reveals just what its true and updated gold holdings are? What is the probability the two events would coincide?

For some more curious observations and thoughts on fueling the New World Order, we recommend the following recently released research paper by the Brookings Institute (link)

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