Guest Editor's Note

Perhaps the biggest news in the market and country reports prepared by Platts senior editors for this issue of Insight is the emergence of China onto the world energy stage and the resultant ripple effects on markets.

Consider imports vs. exports. During the first eight months of 2004, China had a trade deficit of US$950 million. By the end of August 2005, that deficit had become a surplus of $60 billion that's headed for $100 billion by the end of this year. China's transition from net importer to (huge) net exporter confirms that it has become an economic powerhouse much sooner than most expected.

Fueling China's red-hot economy is oil. China accounted for over 40% of the worldwide growth in demand for oil in 2004, when its imports of crude shot up by almost 35%. With a GDP growing at 8% to 10% per year, China's need for oil is projected to increase by 150% by 2020, surpassing that of the U.S. The Middle Kingdom's seemingly insatiable need for "black gold" (not unlike America's) has driven it to invest its new trade surplus in economic relationships with countries that are openly hostile to the U.S. For example, China is already the top importer of Iranian oil and gas. Earlier this year it also signed an agreement to fund oil and gas exploration in Venezuela.

Even closer to home, Chinese state-owned oil companies have begun seeking what has been called a "strategic partnership" with Canada, the top petroleum supplier to the U.S. (The U.S. now accounts for 85% of Canada's oil exports.)

The outlook for 2006: China's continued penetration into the Western Hemisphere could have profound economic and political implications.

Dr. Robert Peltier, PE

Editor-in-Chief, Platts POWER magazine

Dr. Robert Peltier, PE