Intriguing stuff. One would expect those mythical speculators to fold and flee..
The US consumer could use a little oil frugality, but why would he do that now? Consumers act when it is too late.

DC — ummm, in order to keep the RMB down, China is bailing out the world, and in particular the deregulated financial institutions that you so dislike.

Is it really so difficult for anyone to comprehend that when Hank Paulson says that his monetary policy advise is for the benefit of the Chinese people, it is actually for the exclusive benefit of Goldman Sachs and company. Does China need US style financial deregulation for a subprime fiasco? Paulson is on record accusing the Chinese of trade cheating by maintaining a fixed currency peg. Nothing could be further from the truth. EDITED HERE BY MODERATOR. The RMB revaluation has been a disaster for the labor intensive textile industries in Guangdong province; over 50% will shutdown production within a couple years. It is not China’s responsibility to bailout the rest of the world, especially since US government policy is exclusionary to Chinese foreign economic interests in Africa, the Middle East, and Latin America,

People were staying close to home in May. They were in a state of shock by then. And all of this was observable in vehicular traffic counts across the nation.

By mid-May, you could roll through downtown Atlanta at 9 PM and not worry about traffic. Prior to that time, I would walk my muscle car trailer around Atlanta on I-285 headed north or south unless it was after 1 AM. I don’t have to go around Atlanta anymore. No need. The traffic is gone by 9 PM. So, I’m saving 20 minutes travel time as early as 9 PM. And some Atlanta car lovers along with their children have the opportunity to see ‘70 Olds 442 convertibles roll by them before they’re all sold to foreign buyers.

Threw that closer in for fun…

No, I wasn’t surprised Brad. I’m travelling the highways too much right now to not have noticed the remarkable decline in vehicle traffic other than the normal rushhour exodus. Beyond that, the traffic was simply not there in the Southeast (as an example).

It may have a surprise to you and some others, but it shouldn’t have been. It wasn’t a surprise to the Baker Institute back on 11 June 2008 when the following was stated in Congressional testimony:

Testimony of Amy Myers Jaffe
Baker Institute, Rice University
to the Select Committee on Energy Independence
and Global Warming, U.S. House of Representatives
June 11, 2008
http://www.bakerinstitute.org/publications/JAFFECongressionalTestimony11jun08-final.pdf

Excerpt:

“It has become a standard mantra in the oil market that higher oil prices are being driven primarily by the ongoing rise in oil demand and that this rise in demand is defying the normal impact of rising prices given the strength of developing economies like China and India. However, in reality, demand has responded strongly to high prices and is currently falling significantly. April U.S. oil demand is running 3.5 percent below a year ago (first quarter was down 4.3 percent) while EU-15 demand has seen a 1.1 percent drop against the spring of 2007. Oil demand in Pacific industrialized nations (Japan, South Korea, Taiwan, Australia and New Zealand) is also down over 4 percent. Overall, while Chinese demand remains healthy with stockpiling to prevent shortages ahead of the Olympics, global oil demand is still faltering, growing only by 0.4 percent so far this year or a small gain of 350,000 b/d (compared to the 2.5 million b/d gain predicted). The argument that Asian consumers are shielded against oil price impacts by generous government subsidies is losing water, given that India, Malaysia, Indonesia, Bangladesh and Sri Lanka have all been raising government-set domestic fuel prices. In China, demand for unregulated products –naphtha and fuel oil- fell 2 percent in the first quarter of 2008, a sign of what will come if China eases its other fuel subsidies after the Olympics.”

Maybe you should consult the Baker Institute so that you won’t be surprised next month. I’m confident that Jaffe and others will keep you straight.

Nothing about the data should have been a surprise to those paying close attention.

And I find it a bit hard to take complaints about how China’s exports are getting squeezed when the latest quarterly data shows a positive contribution from net exports to Chinese GDP growth and exports are up 18% y/y. Moreover, the biggest impediment to more job creation in china is likely the cheap cost of capital (negative real rates) and resulting substitution of capital for labor. And that stems directly from China’s policy of holding the exchange rate down — which rather clearly does a better job of supporting the export sector than creating jobs. I would suspect that Chinese job growth would go up if China spent the funds now used to support the export sector on a domestic public works program.

DC: politicians need to posture (preferably exotic foreigners) to partially satisfy public desire for action. Verbal, inconsequential abuse of people without specific authority is the simplest form. Like the POBC head who wants to learn from “US mistakes” . Be glad it is only words..

Don, the real terms issue is indeed interesting. However probably much US of imports is invoiced (and priced, more importantly) in USD. How much can the Chinese manufacturers squeeze their production cost. On top of that, container rates have risen considerably. No so long ago, empty containers (made in China at about (2002) USD 2-3000 each) were often simply left in Long Beach. Now they are shipped back with bagged (ready to distribute) bulk goods. That reduces shipping cost (over the return voyage) a little, but not for long, with these fuel prices. So I guess we should give the volume numbers a little time.

The fall in net imports of crude + petroleum products has been pretty dramatic this year in volume terms, and today’s numbers showed this is continuing.

One aspect worth noting (and I realise that this is more a strategic as opposed to an economic consideration) is the changing concentration of those net imports. The EIA haven’t put up May numbers yet, but in April net petroleum imports were down 1,085,000 bpd vs the same month last year. However, if you split this you find OPEC imports were up 254,000 bpd and non-OPEC imports were down 1,339,000 bpd.

Increasingly therefore, even though net imports are declining, OPEC nations are gaining a far greater share of petroleum imports, and former stalwarts such as Mexico, the U.K. and Norway are playing an ever reducing role as their oil production declines.