How Does China Do It?

by John Brian Shannon

Why do all the jobs keep going to China? Everyone wants to know.

The Western nations are short of jobs. At present, 150 million jobs have left Europe and North America over the past 40 years and have been relocated to Asia.

This trend has been in play for a few decades, but it began in earnest back in 1973 when the Arab Oil Embargo caused millions of Americans to purchase economical Japanese cars instead of Detroit’s offerings at the time – the thrilling but thirsty American gas guzzler.

Since that time, not only Japan but South Korea too have exported cars to the Western democracies by the millions. The market share of imported cars registered in 1960’s North America was microscopic but now sits at over 50%. China is now exporting cars worldwide and they are increasing their market share in Western nations.

That about covers the automotive market discussion.

But it is not the entire story. There are other factors at play some of which I will cover below and in future blogs. It’s a big topic… trust me.

For another example, when the West decides to design, engineer and build a new fighter plane at a cost of 100 billion U.S. dollars (a hypothetical number, just for comparison purposes) up to one-third of that money is diverted to corporate profit and doesn’t influence the final product.

When communist China decides to design, engineer and build a new fighter plane at a cost of the equivalent of 100 billion U.S. dollars (a hypothetical number, just for comparison purposes) all 100% of that investment goes towards the design, engineering and build quality of the fighter plane.

This is but one example which can be demonstrated many times over. It’s not just fighter jets. Every military ship, airplane, vehicle, guns, ammunition, along with civilian cars and trucks, industrial mining equipment, farm machinery, electronics, railway cars, locomotives and even the railway tracks can be built for less in China.

Communist corporations which do not have to make accommodations for profits have an advantage over ones that must make accommodations for profits. On the hypothetical American example above, 30% of 100 billion U.S. dollars is… drum roll please… 30 billion dollars! That is a lot of R&D money diverted to corporate profit from product testing, build quality – or marketing and advertising which almost always results in more sales.

Anything we can manufacture, China can manufacture at a lower cost when compared to the Western manufactured item. Thirty percent is just the beginning as some items can be manufactured for 1000% less than comparable products in Europe or North America.

During a telephone interview in February, a sitting Member of the Parliament of Canada told me that it is much cheaper for North American oil companies to dig up the tar sands in Alberta, Canada, transport that material to China for refining and then transport it back as finished products to North America.

It’s easy to do some quick math here. The Canadian Enbridge Northern Pipeline is projected to cost over 5 billion dollars if it gets built. The plan is to pipeline the material to Canada’s west coast (highly diluted with petroleum condensate) and ship it across the ocean to China where it can be refined into pure gasoline, motor oil, diesel fuel and other products normally made from conventional petroleum.

Super-tankers will pick up the tar sand/condensate mixture, which is called ‘dilbit’ once it is mixed together into a consistency which will flow through the pipeline system and transport it in that form to China, where new refineries are being built to receive the dilbit material. New Chinese oil refineries cost 1 – 2 billion Canadian dollars (equivalent), while new North American refineries with their higher land, construction, permitting, labour and emission control costs are estimated in the 12 billion Canadian dollar range – which is why no new refineries are planned for North America.

New SuezMax super-tankers cost between 500 and 900 million dollars a copy, depending on how many barrels of oil they carry and whether they are single-hulled ships or an infinitely safer design – the double-hulled super-tanker. Some super-tankers carry over 1 million barrels of toxic dilbit. Expect China to run 24 – 32 new super-tankers between the west coast of Canada and China 365 days per year.

After refining in China, SuezMax super-tankers will return the finished products to North America for distribution throughout the western United States and Canada’s western provinces.

Even with all these additional transportation costs and other activities – the gasoline, diesel and other products will cost 30% less than when compared to Canadian or American oil refineries performing the same refining operations here.

It remains to be seen whether the oil companies will pass along those cost savings to consumers.

John Brian Shannon writes about green energy, sustainable development and economics from British Columbia, Canada. His articles appear in the Arabian Gazette, EcoPoint Asia, EnergyBoom, Huffington Post, the United Nations Development Programme – and other quality publications.

John believes it is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.

Check out his personal blog at: http://johnbrianshannon.com

Check out his economics blog at: https://jbsnews.wordpress.com

Follow John on Twitter: https://www.twitter.com/#!/JBSCanada

David Suzuki: Screw the Environment! The Pipeline Will Hurt Our Economy | MY COMMENT

David Suzuki: Screw the Environment! The Pipeline Will Hurt Our Economy — The Huffington Post – Canada
By: Dr. David Suzuki  January 12, 2012

MY COMMENT — Dr. Suzuki easily destroys the house of cards arguments put up by some people and corporatio­ns supporting both the Enbridge Northern Gateway pipeline and the Keystone XL pipeline.

There are so many billions of dollars invested in the tar sands now and much of it has been invested by China, the U.S. and others, that there is no going back now. The tar-sands will be extracted every day for decades, unless the price of oil drops below the tar-sands extraction price.

My concern is a spill over pristine land or sea. For that reason, an oil pipeline with supertanke­rs is out of the question. If tar sands product is going to be exported to China (it will be, trust me on this) an oil pipeline and supertanke­rs are the absolute worst way to go. What makes way more sense is to highly upgrade the tar sand material to highly-ref­ined ethane and send it to Kitimat by high-press­ure gas pipeline. LNG tankers are innocuous compared to crude oil tankers! In case of accident, ethane evaporates (unless ignited) into the air instead of destroying thousands of miles of coastline and countless sea-life.

Even exporting the raw tar-sand itself — delivered by rail to the port and carried inside bulk carrier ships (the same way as coal is exported every day in BC) is light-year­s better than shipping crude oil!!

Exporting crude to China from Kitimat, really is the worst option of all the available choices.

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My second comment on this same article by Dr. Suzuki:

OPEC could care less about Canada’s tar sands oil, or any other oil, anywhere. Regular readers of Middle Eastern newspapers and Middle East oil industry periodical­s know that all the oil OPEC produces every day is already pre-sold — and a year-long waiting list is in place for any extra oil that may become available due to delivery cancellati­on or additions to supply from bulk oil stockpiles there.

Note­: Not all OPEC countries are based in the Middle East, but Saudi Arabia produces about half of OPEC’s total.

Middle Eastern oil costs less, requires much less refining and is of higher quality than any oil in the world — except West Texas sweet crude which is the creme-de-la-creme of petroleum. Saudi oil is rated at about the same ‘sweetness­’ as (North Sea) Brent intermedia­te crude oil which is tied with Saudi oil for 2nd place.

China buys 50% of all Saudi oil extracted and they would buy all of it — and a lot more if they could.

There is no competitio­n between Canada and Saudi or other OPEC countries. If a glut suddenly appears due to market conditions­, buyers always line up to purchase the ‘good’ crude as it is often cheaper especially when you factor in refining cost. ‘Sour’ crude sits until the market picks up again.

Here is a huge dump of informatio­n on the Saudi petrochemi­cal industry for you in PDF form;
http://www­.sabic.com­/corporate­/en/binari­es/SABICCo­rporateBro­chure_E_tc­m4-1610.pd­f