China is now the world’s #1 consumer of energy, and its hunger for oil, gas, and coal (to fuel power plants like this one) will continue to grow, according to the IEA. (image: cejournal.net)

On Monday, the International Energy Agency (IEA) reported an event that energy experts around the world have been predicting for years: China has officially overtaken the US as the world’s biggest consumer of energy.

The Financial Times reported (via cnbc.com) on Tuesday that the IEA’s just-released report on last year’s energy consumption data showed that

China last year consumed 2,252m tons of oil equivalent of energy from sources including coal, oil, nuclear power, natural gas and hydropower, about 4 per cent more than the US.

The announcement amounts to an important milestone in the shifting picture of how the world’s energy is used and who is consuming it. It also highlights two trends that have marked the last decade: rapid growth in China’s economy and thirst for energy and increasing energy efficiency in the US. More recently, the global recession curbed energy use in the US by slowing down the national economy while having less of an effect on China’s economic health and growth.

The effects of China’s ascendance to the top of the list of the world’s energy-consuming all-stars will be no less than transformative, the IEA said. As energy demand in China grows, so will its imports of oil, coal, and natural gas, which could lead to rising prices or even price spikes. Many believe that breakneck growth in Chinese oil demand was a major factor behind the crude oil price spike of 2008.

As the world’s biggest energy consumer, China will also have a major influence over how energy is used, “from the types of cars manufactured to the kinds of power plants built,” reported the Times. In doing so, China will help determine modes and methods of energy consumption in the rest of the world.

In a development that offers a glimpse at how energy-gobbling China might affect oil markets in the coming years, the Asian nation was also the top importer of crude from Saudi Arabia in 2009—a title that the US had held for decades.

While the IEA report confirms that the US saved money and reduced carbon emissions by consuming energy more efficiently over the last decade (efficiency increased by an average of 2.5 percent per year during that time), it also showed that China’s insatiable appetite for energy will more than offset any consumption reductions in the US or Europe.

The IEA’s finding does not come as much of a surprise to energy observers, but it did happen a bit more quickly than many expected. It’s now more clear than ever that if you want to know what the future of energy looks like, you should keep an eye on China.

Crude oil prices over the course of today, April 6. (image: ft.com)

Crude oil and heating prices inched up on Tuesday as signs of global economic recovery continued to support higher prices. Last Friday’s payroll report showed that the US economy added jobs, and in the past week reports from Europe, Asia, and the US showed growth in manufacturing activity. Economic signs overcome the effect of the dollar’s strength, which tends to depress oil prices. Crude oil and heating oil futures are priced in dollars, so a strong dollar makes them more expensive for traders who hold other currencies. Traders now look ahead to weekly inventory data, especially Wednesday morning’s report from the EIA, to gauge oil demand in the US.

Today’s closing prices on NYMEX

Crude oil (May 2010 contract): Up 0.2 percent, $86.82 per barrel.
Heating oil (May 2010 contract): Up 0.1 percent.

Canadian PM Stephen Harper gets splattered. "Tar Nation" is a 1790s-era euphemism for damnation, and a 21st century-style tool for spreading political opposition to tar sands mining. (image: tarsandswatch.org)

An online Canadian video game released Sunday allows users to shoot oil at politicians who support Alberta tar sands mining. Called “Tar Nation,” the game was designed by the Polaris Institute, a Canadian think tank that conducts public outreach campaigns on issues disproportionally represented by corporate-driven dialogue and information. Otherwise known as oilsands, tar sands are a controversial source of crude oil because of their development’s heavy toll on the environment, both immediate and long-term.

Set in the backyard of a foreboding oil refinery, the game features Prime Minister Stephen TARper and Opposition Leader Michael OIL RIGnatieff (that’s Harper and Ignatieff in more relaxed settings) as Jack-in-the-box targets popping up and down behind a tree stump, brown weed, and rock ostensibly subjected to thermal cracking.

Insidious Design Net designed the Flash-animated game as an activism tool. Even if you were just interested in spraying goop, it’s hard not to absorb the underlying message. One’s eyes drift over headlines and phrases such as “most destructive project on earth; “How Canada subsidizes fossil fuels at the expense of green alternatives”; and “about to become Canada’s no.1 emitter of greenhouse gases.” As previously reported, Canada’s tar sands have come under fire especially since it was discovered that nine projects are already failing to meet clean-up rules, leaving vast quantities of toxic waste on the ground. When enough damage has been done, the game presents the player with a letter to the real-life politicians. Compared to the oil shoot-out, that timeless tool of political advocacy gently makes its point.

Dear Stephen Harper and Michael Ignatieff,

I am deeply concerned that you are both stuck in the Alberta tar sands.

The tar sands represent the wrong direction for Canada. With three to five times the greenhouse gas emissions as conventional oil, severely damaging environmental and social impacts, and negative economic consequences for other provinces, the tar sands are taking Canada in the wrong direction.

It is not too late to invest in the new energy economy of the future and turn your back on the tar sands.

Sincerely, . . .

This is not the first time someone has used entertainment vehicles as a way to protest tar sands. In March, a coalition of environmental groups published an ad titled “Canada’s Avatar Sands,” that cast tar sands as the mineral “unobtainium” from the movie Avatar. Parallels between the fictional resource’s role in the film and the issues surrounding oil sands in real life are hard to ignore. Whether Avatar’s makers also intended this connection is open to interpretation.

As owner of the world’s second largest oil reservoir, and as the primary oil exporter to the US, Canada stands at a significant crossway. Developing its oil sands would be very economically profitable in the long run, and give the country new leverage against the US. However, the process of removing bitumen from the Alberta tar sands contaminates millions of gallons of fresh water could decimate an area of land the size of Florida, 14,000 km of which is intact forest—itself a rare thing in the world. These destructive side effects come with no easy solution.

A colorful and engaging way to win people’s minds, “Tar Nation” is an effective way to publicize an issue that deserves wider scrutiny. Also, if you watch the game long enough, you can see Stephen Harper briefly clutching a stuffed animal for no reason.

*Pwned is a 2000s-era version of the word “owned,” itself a euphemism for “taken down,” or “obliterated,” and originating from internet video game culture, where players would mistakenly type “P” instead of “O” when communicating with a defeated player. Its usage is mostly limited to the internet.

Speculation on commodities markets has been driving up heating oil and gasoline prices for months. (image: freeople.com)

As crude and heating oil prices rose during the course of 2009 in the face of low demand and massive supplies, it became increasingly clear that speculation was once again driving up oil prices.

This week, crude oil prices hit a 17-month high, sparking a new thrust of media activity on oil speculation’s outsized influence on prices that leads directly to Americans paying more for gasoline and heating oil. Following a story on speculation driving up prices from a producer at MSNBC published on Wednesday, writers for the Wall Steet Journal’s MarketWatch column, the Miami Herald, and CNBC all got in on the story this week:

From Jim Jelter at MarketWatch:

…mixed into the fundamental news are forces that have less to do with the laws of supply and demand than with financial forces far beyond the oil industry. Oil futures long ago ceased to function merely as vehicles for managing risk in the energy business.

From Kevin G. Hall of the Miami Herald:

“It’s the story we’ve been talking about . . . . It’s really about oil being an attractive investment for investors right now,” said Troy Green, a AAA spokesman. “You’ve seen quite a bit of money flooding into the oil markets because of that.” What’s different about today’s price run-up from two or three years ago is that oil is now in ample supply.

In response to President Obama’s announcement of expanded oil drilling off the US coasts, Michael W. Masters wrote for CNBC:

It’s important for observers to realize that, while more drilling may help domestic supplies over the very long term, oil price formation is dominated by speculative money flows today. So in this case, despite a major announcement by the President, which could easily be viewed as leading to larger supply, oil prices rise.

For the last year (and perhaps longer) there have essentially been two prices of crude oil and other petroleum products: the real world or “nominal” price based on supply and demand (the only forces that should influence prices) and the speculative “paper” price set by surging investment activity by major players on the financial markets. Despite living in the real world, consumers of heating oil and gasoline have been forced to pay prices determined by the speculative world that only exists within the world’s commodities markets.

Kudos to the national mainstream media for finally reporting on this phenomenon. Perhaps that reporting will help speed along regulations under consideration by the CFTC aimed at curbing excessive speculation.

Just remember when you read a story on speculation driving today’s higher oil prices—HeatingOil.com reported it first.

Yesterday, heating oil prices rose due to expectations for reports of an employment recovery. (image: sandiegobusinesslawyerblog.com, bortonia via istockphoto.com, and zimbio.com)

Yesterday’s substantial gains in crude and heating oil prices on the New York Mercantile Exchange made for another moderate increase in retail heating oil prices today. Anticipation of a positive jobs report released by the federal government was the main force behind rising prices on Thursday, as the NYMEX and other markets are closed today for the Good Friday holiday. That hopeful anticipation turned out to be well founded this morning, when the report showed that the US added 162,000 jobs in March, the biggest gain in three years. Traders see the big upswing in employment as a sign that the US economy is on the rebound that will drive up demand for petroleum products. Expect additional oil price increases in reaction to the jobs data when markets re-open on Monday.

Today’s average retail heating oil price in the Northeast is 4 cents higher than Thursday’s average price.

"The future of US energy is heating oil," said Pres. Obama to a rapt audience on the grounds of a NJ heating oil storage facility. (image: Nicholas Whitaker via heatingoil.com)

After yesterday’s announcement that the US would expand offshore oil drilling, President Barack Obama dropped another bombshell on the energy world by calling heating oil “the key to America’s future” and pledging to bring heating oil to 10 million more American homes by 2014. To demonstrate his determination on this score, Pres. Obama will be converting the White House to a heating oil system, and dug up the Rose Garden to install a brand-new, 1,000-gallon home heating oil tank. President Obama announced his ambitious plan at a heating oil storage facility in Landon, New Jersey.

As crowds cheered, the President explained the importance of heating oil:

We cannot afford to delay one more day in bringing the citizens of this country the safe, reliable, and affordable heating fuel they deserve. For too long this advance has been held up the partisan squabbles of the past—the time has come to move forward. Heating oil’s high efficiency, low emissions that are getting lower each year, and clear path to 100 percent renewable biodiesel content make it the finest heating fuel in the land. All of America deserves this fuel. We’re starting at the White House, but we’re on our way to your house!

The announcement provoked some flutter in the financial press, as journalists struggled to piece together how heating oil, a close cousin of “oil” oil, was producing so much activity on the trading floor, outperforming metals, gasoline, and crude. Searching for an industry expert willing to explain the frenzy, Bloomberg news could only find the Maine Governor’s Office of Energy Independence and Security:

In Maine, the President’s comments have created a phenomenon. Following the president’s announcement, our office has been flooded with calls from Mainers eager to switch to heating oil for their home heating needs. The excitement has unfortunately led to some unlawful activity in southern Maine, where a band of heating oil marauders is performing involuntary repairs on tanker trucks carrying diesel fuel, flooding the local market with supplies of no.2 oil.

President Obama’s announcement came as surprise to many Americans—especially residents of the West coast and South. Puzzled viewers of the president’s speech in those regions turned to the internet to find out what heating oil is, making “what is heating oil?” the most-searched phrase on Google’s US search engine.

The craze swept the nation in record time, with some citizens driven by their enthusiasm to begin clearing space in their basements and garages on Thursday afternoon to make room for a new heating oil tank.

Following his prepared remarks, the president took questions from the press, and offered some details of how his program, dubbed “Making America Cozier with Oil Heat.” Private citizens will be rewarded with rebates worth 40 percent of the cost of their new oil heat system, including tank and furnace or boiler. New users of heating oil will also receive their first fill-up of the fuel for free, thanks to a cooperative subsidy program administered through the Department of Energy and local state oil dealer associations.

Reached for comment on Air Force One after his speech, the president told HeatingOil.com, “I’m fired up to get more people on board with this great fuel, and I’ll need your help to do it. Keep the good work, and spread the word!”