[Sys1]

If the possibility of war with Iran were cause to fill up the SPR then one would think the West would be doing it also, but there are no public reports of this. I'm playing devils advocate and am not convinced war with Iran is the reason. I don't think war with Iran is that likely.

The reason western countries are not yet filling their SPR reserve is because they know when the attack will really occur while China doesn't have a clue, beside "soon".
It is almost certain that something huge will happen in the coming months for a simple reason. If people attention is not distracted from the global economic collapse, a spring revolution wiping capitalism off the planet could happen. They don't want to loose their power. They will invent anything to justify a war or mass murdering.
Will it be a war with Iran, a H5N5 virus, Hollywood like terrorist attack or whatever, be sure they won't let capitalism peacefully rust for the coming decades.

[AgentR11]

The price is acceptable.
They have room in their SPR.
They have squat for domestic production.

If I were running the show over there, I'd be filling that SPR as fast as I possibly could, and building additional SPR capacity as fast as I possibly could. In essence, they *NEED* a US sized SPR PLUS additional SPR capacity similar in valuation to US domestic production. Anything short of that and they remain critically vulnerable to instant economic devastation in the wake of an interrupted stream of oil imports.

It makes zero sense to sit on US Treasuries at this point; especially as long range goals there now including pivoting their point of consumption from export markets, to internal domestic markets. The only valid question is how fast can you convert treasuries to productive, physical assets that have intrinsic value without disrupting existing economic balances and without disrupting the ability to achieve long term objectives.

war or no war with Iran. same policy.

[mmasters]

One way or another I'm sure it's to prepare for oil shocks.

[diemos]

"Why is China filling its SPR?"

China's leadership is filled with engineers.

Every other country in the world is run either by lawyers or thugs.

[MD]

"Why is China filling its SPR?"

China's leadership is filled with engineers.

Every other country in the world is run either by lawyers or thugs.

Right. Given that fact why wouldn't they fill their reserve? Engineers are by nature strategic thinkers.

duh?

[Plantagenet]

Its smart for China to have a full SPR in case of any kind of oil shock or shortage.

Unfortunately, the US isn't as smart.

Instead of filling our SPR, Obama took out 30 million barrels of oil out and dumped it on the market in 2011. That oil would cost 3 billion dollars to replace at current oil prices. AND the dems are lobbying Obama to raid the US SPR again before the 2012 election and deplete our emergency supplies even more.


Obama wasted 3 billion dollars of oil from the US SPR in 2011, and will likely waste more of our emergency supplies of oil this year as well.

[MD]

You need to understand Asian thinking. Their very language is based on relational thinking. It's full of metaphor strings and imagery. It's very mathematical.

Western thinking and language is more discreet, in comparison. Our language breaks it down into bits.

If you look at the alphabets it becomes obvious. Western thinking has twenty six bits expressed via objects. Eastern thinking has three thousand objects expressed via relationship.

Math is all about expressing relationships.

duh?

[Plantagenet]

You need to understand Asian thinking. Their very language is based on relational thinking. It's full of metaphor strings and imagery. It's very mathematical.

Western thinking and language is more discreet, in comparison. Our language breaks it down into bits.

If you look at the alphabets it becomes obvious. Western thinking has twenty six bits expressed via objects. Eastern thinking has three thousand objects expressed via relationship.

Math is all about expressing relationships.

duh?

I don't think being an engineer or a mathematician or thinking in Chinese ideograms is really a prerequisite for understanding the importance of having a full SPR at a time when global oil supplies are getting tight and there are threats of supply disruptions or even wars in the ME.

Its really just common sense. The Chinese goverment has it---the US goverment doesn't.

[SeaGypsy]

The price is high and the dollar is gaining strength, not losing it. So, the question remains, if there is plenty of oil and the price is high, why are they filling and no one else is?

What everyone else said. It's a relief that at least here at peakoil.com some Americans can see this argument is bogus. Oil is dirt cheap. The temporary lift in the dollar's strength is merely a response to risk averse investment moves as your government gets ready to start another hideous war. You get you 'gas' cheaper than any other 1st world country, yet never quit bitching about it. War will not save the petrodollar, nor drop the price of oil. China has just set a new floor under prices for the forseeable future. At a price which stings the US and EU's butts. Simultaneously converting what could soon be a pile of useless paper into something more usefull than, well, anything.

[seahorse3]

SG, I'm not bitching about high gas prices. Why you think my post is a bitch I don't understand. My post is asking for thoughts about why China is filling it's SPR, it really is that simple. You take the position that oil is cheap right now thus it makes sense; but there are plenty of facts to suggest oil isn't cheap right now- last year was the highest average price of oil on record and the markets are well supplied right now; further, the price of oil being significantly higher than it's cost to produce it, do there us plenty of reason to believe the price of oil is higher than fundamentals demand, especially when demand is dropping in the West. So I'm trying to understand why they are not buying treasuries when that system worked so well to grow their economy for so long and why they are choosing to buy oil at all time average highs. Maybe they think there will be war with Iran- I don't. Maybe they think we ate at or near PO meaning a decline in future production- but with a recession coming and a good argument China maybe in for a hard economic landing I'm not sure they believe oil prices are going to go up. The effect of them buying oil is driving up the price of oil and causes refineries here to close- intended result or unintended curious. For years we have allbunderstand that PO is a western problem, meaning if the western economies crashed it would free up lots of oil for the rest of the world, so I don't discount the possibility this may be intentional since we did it to the Soviets. Mine is a strategic question, not a bitch. In fact, I'm all for higher oil prices here in the US to force much needed change

[SeaGypsy]

Ok truce on the bitch. Here's why I say oil is still dirt cheap:

1/ peak oil is no longer a fringe topic, more a biting economic and geopolitical fact. Of course the rhetoric in the MSM will say otherwise, but the big players are not stupid and know the graphs we here are familiar with.

2/ ELM is definitely a serious factor in turmoil in the ME. Self interest of export dependent markets dictates an ever increasing floor price.

3/ Even if most of the oil we are currently burning is $10- $20 cost, virtually all new oil coming online is more like in the $60- $80+ cost. The peaking old mega-field holders are aware of this. Why on earth anyone thinks they should sell for less than their competition can produce for is beyond me.

Then there are all the complexities of currency, ongoing high tension geopolitical strife. Likely supply line issues building. I bet a low of $78 odd for this years price guess. as of this news I am betting against myself. Those who predicted we started at the new low were correct.

[AgentR11]

Mine is a strategic question, not a bitch. I

If its from a strategic point of view, then it really shouldn't be a question for you at all.

There is absolutely no strategic reason for China to continue to hold the level of US Treasuries that they do.
Their rumblings in fact seem to suggest that they believe we will monetize-default before they are able to turn their current inventory of Treasuries into real assets.

Oil, being reasonably priced at the moment, is a fairly easy commodity to buy with those USD, and they have room to put it somewhere. In the process of putting that extra oil aside, they increase the resilience of their own economy to outside impacts.

How is this even debatable strategically???
Looks like a slam dunk, must do, to me.

edit: lol... I type "slam dunk" and my next banner add is basketball tickets. I haven't watched a basketball game in years.

[dinopello]

I think looking out over the next 10-20 years which is a pretty short timeframe by Chinese standards, oil is cheap now. Also, since they do have a large share of the global manufacturing base, they know how much their factories are producing and realize that we are still in a global economic slow period so why not stock up now on critical resources like oil, rare earths, etc. If I ran a country now I would be looking to drain the resources from any country willing to sell me their goodies and would be storing them in my country.

[steam_cannon]

Sounds kind of like they're cashing out their account 21214. Lets hope they do it nice and slowly.

[radon]

So I'm trying to understand why they are not buying treasuries when that system worked so well to grow their economy for so long and why they are choosing to buy oil at all time average highs.

It does not make much sense for them to buy treasuries since the beginning of QEs. Maybe QEs started when they slowed down on buying treasuries, maybe the opposite - QEs forced them to stop buying treasuries. Not sure what is primary and what is secondary here. In any event the Chinese may have reasoned at some point that they already built the critical industrial mass and no longer need to play with treasuries to support their growth. With QEs in place, any tangible assets are better than treasuries that are constantly being inflated out.

They are buying everything tangible everywhere they can. Oil is no worse than any other asset for their portfolio, and the current price may not be a priority. They may actually be buying some cheaper oil from Iran at a discount due to the sanctions, and do the transaction in bulk and put the oil in SRP - win-win for them and for the Iranians.

[GMavros]

AgentR11 has it right, and it is very simple.
As a European & American citizen I have been working in Beijing for almost ten years now. Due to the western & global economic downturn they are now focusing on a domestic market economy.
There has been a considerable shortage of oil in China for the last ten years because they would not buy much of it at a price that would hurt their economy. This is the reason they have monopolized their oil imports, to keep domestic fuel prices at a constructive level. Most non state owned refineries here have been operating in the red, staying afloat only by central government infusions, many of them shut down due to the lack of crude supplies.

If they were to allow a market driven price structure domestic fuel prices would skyrocket here, not good. Now they very wisely are buying oil, which is still at a relatively affordable price, because they need it in order to mobilize their domestic economic engine. They are also unloading their US dollars into oil purchasing and into other foreign investments, as the dollar is loosing its value and credibility.
The Chinese always approach things for the long term, very wisely so.

[Quinny]

How can you be a European and American citizen?

[SeaGypsy]

Easy, like me. I've done one better. Born USA/ automatic Citizen. Migrated Europe to live with grandparent's born in UK, UK Citizen entitlement. Migrated again to Australia, Australian Citizen by descent.
It's only a problem seeking US Citizenship without an Oath of Allegiance, something I have never had to make in my 45 years as a Citizen.

[dissident]

China wants everything, everywhere !!

http://au.finance.yahoo.com/news/china- ... 55212.html
China and Iceland announced a deal on the oil-rich Arctic region Friday after Chinese Premier Wen Jiabao flew in to Reykjavik on the first stage of a four-nation European tour.

"Oil-rich Arctic region". Really now, you would think this is established fact and not brain-dead boosterism. Most the Arctic basin is metamorphic rock. And for sure there is no oil or natural gas around or under Iceland which is sitting on the mid-Atlantic ridge. If you look at the USGS assessment you will see that the Siberian shelf, the Beaufort Sea and the Alaskan shelf are the only regions of interest aside from the already developed Norwegian shelf. Aside from a logistics base, Iceland is not on the oil and gas radar. China will have to gain access to the EEZ of Russia, USA and Canada and the road there (assuming it is even open) is not through Reykjavik.