Why Are Gas Prices So High?

This is a very relevant question that many people are asking.  Why is the average gas price in the United Stated $2.50, while a little over a year ago it was below $1.50?  In 1981, a similar run-up in gas prices triggered a nation-wide recession.  Should we expect another major recession in the near future? 

Almost everyone has their own idea of why gas prices are so high.  Some blame the government, others blame commodities speculators, others blame the Arabs, others blame the oil companies, etc.  While many of these theories have some semblance of credibility the biggest reason that oil prices continue to rise is because of unrelenting international demand.  Many countries that just a few years ago imported no oil are now some of the leading oil consumers.  It used to be just the United States and a few European countries that imported oil.  However, in the last few years a new major player has emerged from the Far East – China!

With 1.3 billion people, the People's Republic of China is the world's most populous country and is now the world’s second largest oil consumer (behind the U.S.).  It currently has one of the fastest growing economies in the world and its oil consumption is growing at a rate of seven times that of the U.S.  In this emerging economy, many individuals are discarding their bicycles and the inconvenience of mass transit and are now purchasing private automobiles.  In fact, by the year 2010 China is expected to have 90 times more cars than it did in 1990.  That’s an astounding growth rate of over 25% a year.  This number has continued to escalate in recent years, with car sales jumping an astounding 75% in 2003.

Of course all of these automobiles need gasoline to operate.  So China, who didn’t even become a net oil importer until 1993, just recently passed Japan to become the world’s second largest petroleum consumer in 2003.  This fiercely independent nation is now growing increasingly dependent on foreign oil.  They currently import 32% of their oil and are expected to double their need for imported oil between now and 2010.  By 2030, Chinese oil imports are expected to equal that of the U.S. (currently they consume only about 1/3 as much as the U.S.).

Since only 4% of the world’s proven oil reserves are in East Asia, China as well as other Asian countries are forced to rely on the Middle East for oil.  Today, 58% of China's oil imports come from the region. By 2015, the share of Middle East oil will stand at 70%. Though historically China has had no long-standing strategic interests in the Middle East, its relationship with the region from where most of its oil comes is becoming increasingly important.

Sixty-eight years ago, an oil-starved Japan embarked on an aggressive expansionary policy designed to secure its growing energy needs.  This eventually led the nation into a world war. Today, another Asian power similarly thirsts for oil.  Will this also lead to a world war?

“And the sixth angel poured out his vial upon the great river Euphrates; and the water thereof was dried up, that the way of the kings of the east might be prepared.”  (Rev. 16:12)