How China Affects Your Fuel Prices

A U.S. economy that is sputtering along may not see lower prices at the pump.

About 80 percent of those surveyed said they aren't spending the money they've saved on lower gas prices this year.

Gross Domestic Product in the United States expanded by 2.5 percent in the first quarter of 2013 over the previous quarter. In a case of apparent cheerleading, when the Bureau of Economic Analysis reported the latest number, the Wall St. Journal said it was an indication that the U.S. economy "perked up" in the first quarter.

Additionally, the Journal explained that the economy's first-quarter tick followed growth of "just 0.4 percent in the fourth quarter" and said "the overall performance suggests the economy continues to expand at around 2 percent a year on average, as it has throughout the recovery." "Recovery" … yes, that was the word they used.

Hold that thought for a moment while we look at China. Just a month ago, Bloomberg News reported that China's energy consumption had stalled "as its economy slows." (Apparently there was nothing to suggest anything even perking up.) But, remarkably, the numbers tell us something else.

[See a collection of political cartoons on gas prices.]

Elaine Leven, president of Powerhouse, a Washington DC-based energy consultant, says "Economic growth in China is still robust and China's GDP grew by 7.8 percent in the first half of 2012 (the most recent data available)." She noted that the growth there is slower than in recent years, adding that China's economy has grown at an average real rate of about 10 percent per year over the past 10 years.

China's energy consumption reflects the growth. Oil demand has increased from four million barrels per day in 2000 to more than 10 million today and climbing. The Energy Information Administration reports that China now represents two-thirds of the world's oil demand growth. And that's important for American consumers to understand and recognize; where fuel prices are concerned, we are impacted by China as much, if not more so, than we are by OPEC.

[See a collection of political cartoons on energy policy.]

So when gasoline consumption wanes in the U.S. amidst reports that robust energy supply outpaces demand and America's "driving patterns have downshifted," it's important not to let these pieces of information paint the whole picture for us. Let's remember that the price at our local pump reflects not only local logistics and taxes but seasonal changes, global crude oil prices and global supply and demand too.

Don't be fooled by a U.S. economy stuck in "neutral."

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