China’s state owned PetroChina has surpassed Exxon/Mobile in oil production. The Associated Press reported the following:PetroChina (PTR) announced Thursday that it pumped 2.4 million barrels a day last year, passing Exxon by 100,000 barrels. The company has grown rapidly the last decade by squeezing more from China's aging oil fields and outspending Western companies to buy petroleum reserves in countries including Canada, Iraq and Qatar. It's motivated by a need to lock up as much oil as possible.
Considering China’s investments, you have to take a look at their bottom line, which is not impressive:
In 2009 and 2010, PetroChina's profit margins for its exploration and production business were only about two-thirds that of Exxon Mobil's. Its stock price has climbed less than 1%, in the past year, compared with a 3.7% rise in the stock of Exxon Mobil.
"You have to ask yourself: What is the purpose of PetroChina?" Bellinski says. "It is to fuel China. That's it. Although they're a public company, I'm very skeptical that they have any interest in shareholder value creation."
Well, that’s one motive. But is there another? Could the U.S. economy and the monetary policy of the Federal Reserve have anything to do with China’s acquisition in commodities such as oil and gold? Since the formation of OPEC and the demise of the gold standard, oil has been pegged to the dollar; it has remained the world’s reserve currency. And it’s no secret that Russia, Iran, Venezuela and China have all openly called for an international currency to replace the dollar.
Is China playing the long game? Are they betting that the asinine policies of the Obama administration and the Federal Reserve will bring about the demise of the dollar? Will an international currency replace the green back? Here is an excerpt from a Mises Institute article published in 2009:
Skeptics regarding the rise of China as a major economic power doubt that China can profit from a weaker US dollar through a stronger yuan or develop a sufficient domestic consumer market quickly enough to offset reduced exports. However, while China contributes to US consumption as an export-dependent supplier, as well as a financier, their exposure to losses resulting from a declining US dollar is limited. A stronger yuan would mean that, after a period of adjustment, China would import more goods and services and that, in real terms, wages of Chinese workers would increase, thus supporting a higher standard of living. What is more important is that a stronger yuan, implicitly backed by growing gold reserves (not to mention by a large and fully modern navy), is exactly what will guarantee China's oil supply.
The struggling US economy, burdened with excessive levels of debt, cannot support a sustained rise of the US dollar against the currencies of growing economies in Asia. Growing demand for resources, especially oil, as well as gold, contrasted with the inflationary policies of the US, will maintain the upward trajectory of commodity prices measured in US dollars indefinitely. In the near term, the end of the petrodollar standard will cause a sharp decline in the value of the US dollar and a marked increase in the prices of oil and of gold measured in US dollars.
Today’s gas prices are a direct result of the inflationary policies of the Obama administration and the Federal Reserve. How much longer will the international community tolerate the U.S. dollar as the world’s reserve currency? Time will tell.
http://www.usatoday.com/money/industries/energy/story/2012-03-29/oil-production-petrochina-exxonmobil/53851876/1
https://mises.org/Community/blogs/hera/archive/2009/10/23/china-s-dragons-oil-gold-and-the-us-dollar.aspx
