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Date:
30 July 2008
Author
Sheila Moorcroft , Research Director, Shaping Tomorrow
Abstract
It is quite possible that ' we ain't seen nothing yet ', that the combined pain
of rising oil and food prices coupled with falling house prices and ever
tighter financial liquidity will get a whole lot worse before we're done. That
pain may, however, provide the impetus for change on several fronts:
What is changing?
No end in sight - In recent weeks, the price of oil has repeatedly hit new highs . Given the current constraints
on production plus increasing demand, the likelihood of a major realignment downward looks low. And, while
oil has grabbed the headlines, other resource prices, such as soya-beans, wheat, platinum or corn, are
showing equally steep trajectories as demand, especially from China and India, continues apace. Water, too, in
the long term, is likely to be in increasingly short supply, adding further impetus for change .
Looking specifically at China . China alone already accounts for half world demand for cement, one third for
steel, one quarter for aluminium. On top of that, its copper imports increased 80% in 2007; iron ore imports
have more than doubled to 375 million tonnes since 2003 - and are forecast to rise to 900 million tonnes by
2014. China's oil imports, meanwhile, are already needed to meet half her current demand of 7 million b/d.
According to the IEA (International Energy Agency), those imports may rise to 13 million b/d by 2030 leaving
only about 3.5 million b/d met by local production. And, to put those imports in perspective, they are
equivalent to more than Saudi Arabia's current total output.
Chinese demand for energy and resources is unlikely to slow for a long while. A recent report sponsored by
Rio Tinto postulated that once per capita income reaches $2000, then demand for resources rises inexorably
until per capita income reaches about $20,000: China's income per capita topped $2000 in 2006. 'The
increase in China's demand for metals during the next two decades may be comparable to the total demand
from the industrialised world today ,' the report concludes.
These figures relate only to China. More rises in demand are likely elsewhere when other emerging economies
follow a similar, if less spectacular, route. As we said, we almost certainly ain't seen nothing yet.
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