China’s growing economy has made it the top importer of Saudi oil. (image: abc.net.au)

In a sign of China’s economic growth and its increasingly influential role in oil markets, China has now passed the United States as the top importer of oil from Saudi Arabia. Energy Secretary Steven Chu confirmed the news at a press conference on Wednesday, reports the AFP.

China’s new status as the leading importer of Saudi oil represents a milestone for measuring China’s oil consumption, but it also reflects different patterns of oil consumption in China and the US, the two largest oil consumers in the world. Like the rest of the industrialized world, energy demand in the US is leveling off as the nation tries to reduce its oil consumption, especially when it comes to foreign oil. China, on the other hand, like much of the developing world, has seen its energy demand increase dramatically of late—a trend that will continue as China’s economy grows.

As industrialized countries take steps to reduce their energy consumption, China will likely continue to be the top importer of Saudi Arabian oil.

Inside the high-tech world of Saudi Aramco. (image: saudiaramco.com)

Saudi Aramco has two new entries on the TOP500 biannual list of the world’s 500 fastest supercomputers, which was released this week, the Wall Street Journal’s Environmental Capital Blog reported Thursday. The supercomputers, which are Dell clusters and run Intel processors, came in at nos. 119 and 134.

Peak oil believers could argue that an interest in supercomputers on the part of Saudi Arabia’s national oil company suggests that Aramco needs significant help to identify new reservoirs in oil fields once believed to be bottomless. And the Saudis are not alone in using a supercomputer in their quest for ever-elusive black gold. The world’s fifth-largest supercomputer—the Tianhe-1 in Tiajin, China—is slated to be used partly for “petroleum exploration.”

The oil industry’s growing interest in supercomputers would seem to corroborate the opinion of geologist and author Jeremy Leggett and the colleagues that he surveyed at this year’s Petroleum Geology Conference in London. HeatingOil.com posted on Nov. 10 that in a poll Leggett conducted during a plenary session, 70 percent of 500 geologists said that peak oil is still a concern.

Aramco CEP Khalid Al-Falih. (image: saudiaramco.com)

In an interview aired Monday, the CEO of Aramco, Saudi Arabia’s state oil company, said that “it will take time to make up for the millions of barrels of lost [oil] demand that we have experienced.”

Khalid Al-Falih, who studied in the United States and has an engineering degree from Texas A&M University, is a 30-year veteran of the Saudi oil industry and Aramco. His short-term prognosis for oil is reduced consumption, owing to the global recession; Al-Falih sees oil demand in the Western world, particularly North America and Europe, remaining sluggish. In contrast to some other industry insiders and commentators, who believe that Chinese demand will make up for this and drive prices higher, Al-Falih said “we see an uptick in China, but not significant [enough] to offset demand loss.”

Medium-term, he believes that demand will rebound: “ultimately, it [increased demand] will come.” When it does, Al-Falih implied that the rebound could last for decades, since he believes it would take that long for developed nations such as the United States to significantly shift their energy mix away from fossil fuel and to alternate and renewable energy.

What about the long-term prognosis? When asked about the threat of running out of oil, as predicted by peak oil theory, Al-Falih said, “oil will be with us not for decades, but for generations to come. . . . ultimately oil will be depleted. And the world will switch away gradually from oil. [But] that’s not something you or I will see in our lifetime.”

He supported his opinion that the transition to a post-oil—or least, significantly less-oil-dependent—world would be generations away by claiming that world recoverable oil reserves (including unconventional oil, such as tar sands and oil shale) stand at 9 to 10 trillion barrels and that these reserves have been growing faster than oil has been depleted. He also said that his own company, Aramco, has been increasing its reserves quickly enough through both new discoveries and improved extraction techniques that it has “been more than replacing our production.”

Of course, Al-Falih speaks as the President and CEO of the Saudi national oil company, so one would hardly expect him to say that oil’s days are numbered or that the transition away from oil can be accomplished quickly. His statement that “I believe political pronouncements about shifting away from oil are counterproductive,” needs to be evaluated in the context of his own political and economic agenda.

Saudi Arabia’s own plans to transform its economy indicate that the government sees a long-term reduction in either consumption (from a shift to new energy sources) or production (through depletion of reserves) arriving sooner than Al-Falih will publicly admit to. According to Al-Falih, the kingdom has begun attempting to build a “knowledge based economy and society . . . to take Saudi Arabia into this new age of focusing on the most renewable of our resources, which is the human resources.” Were oil something that Saudi Arabia believed it could rely on for its economic engine “for generations to come,” the country would feel less urgency for bridging from a resource- to knowledge-based economy.

In terms of crude prices, Al-Falih seemed to be looking for prices in the $80–$100 per barrel range. He remarked that prices above $70–$80 per barrel are needed to finance oil exploration and development projects around the world, and said that “we believe there is a happy medium above the prices we have seen but certainly below the feverish prices we saw last year where consumers will not be hurt but producers and investors will invest for the capital investments that will be required to bring energy supplies up and to sustain existing supplies as well.”

The “prices we have seen” are this year’s prices, which settled at $67 per barrel Monday. The “feverish prices” are 2008’s record highs of around $147 per barrel. He did note that Saudi Arabia is—with its world-leading resource base and production capacity—well-positioned to survive on lower prices than other oil producers, which may be a sign that his country will not attempt to drive prices up by pulling back on production.