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One of the key factors determining oil prices and global demand for oil over the next few years will be the course of China’s economy. Beijing continues to maintain that its GDP is now so big and its foreign exchange reserves so large that they can weather a deep, prolonged recession in the rest of the world and still continue to grow. China’s economy grew by 11.9 percent last year and all indications are that it will increase by 10 percent or so this year despite slumping exports.  Chinese oil consumption has been growing by about 5 percent a year.

In recent weeks, however, there been signs that China’s economy is starting to slip. Growth in electricity consumption has started to slow and imports of key commodities are declining as are shipments to the US.

For now, no one seems willing to forecast a major slowdown in the growth of China’s economy and oil consumption, but this situation bears watching. While the growth of world oil consumption has been slipping in recent months, lower prices and continued growth in consumption by China and the Middle East oil exporters could be enough to offset the declines caused by a rather serious recession.