China could offer America a trade deal it cannot refuse – on natural gas
Andy Xie proposes a win-win trade between the world’s two largest economies that would – in one fell swoop – spark growth, cut pollution and improve the world’s most important bilateral relationship
The US has experienced a revolution in oil and gas production. Its shale oil accounts for over half its total oil production, making the US one of the largest oil producers in the world. Its shale gas has surged in output, making it one of the largest gas producers in the world.
On the other side of the Pacific, China’s oil production is falling. Its natural gas production is stagnating, despite repeated government prodding for higher output. China remains stuck with coal for two-thirds of its energy needs. Lately, use of the dirtier but cheaper brown coal has grown rapidly, adding to the environmental nightmare.
America’s success in shale energy and China’s failure reflect better endowment for the former but, more importantly, the triumph of entrepreneurial drive and the free market. The oil and gas sector is usually dominated by state-owned enterprises, like in China and Russia, and, in some countries by huge multinational companies. The US shale sector is very fragmented in ownership and production. Entrepreneurial dynamism is driving its rapid technological innovation.
China poised for pick up in oil and gas pipeline construction after prolonged lull
Ironically, China’s coal sector has grown rapidly due to the same entrepreneurial force. Coal production is largely from privately owned mines. Even though most are small, they have managed to rapidly increase production to fuel China’s industrial rise in the past two decades. Without private enterprises in the coal sector, China couldn’t have grown so much.