Truck and Barter

More on China and Oil

The comments of Randall Parker and Tyler Cowen require me to summarize my beliefs about China's increasing use of oil. In the short run:

1. The rising demand for oil by China and the resulting higher prices make the US worse off.

2. The rising supply and lower costs of manufactured goods from China make the US better off.

You do the net valuation of 1 and 2.

In college, I saw a flyer from the Columbia School of Mines declaring that "Everything you have, you have because of mining." It's not true--there are other factors involved--but you get the point. In this vein, Randall points out that 1. further enriches Middle Eastern resource holders, who will be paid by the gains in 2. However, his post makes me think that in the long-run:

3. The rising demand for oil by China and the resulting higher prices will cause the US to substitute away from oil.

Given many of the factors cited by Tyler in his post, the extent and consequences of 3. are inherently unpredictable.

Posted at May 10, 2004 03:33 PM

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