HONG KONG — Oil prices continue to fluctuate nervously with every report or rumor that the world economy is either on the mend or heading for double dip recession. They slithered again when it became clear that the U.S. economy is still in trouble. Ben Bernanke, the U.S. Federal Reserve chairman, and his colleagues are arguing furiously about what, if anything, they can or should do to come to the rescue.

Oil offers a specific example of our dangerous world. The Paris-based International Energy Agency reported that China has now passed the United States as the world’s biggest consumer of energy. According to its data, last year China consumed 2.25 billion tons of oil equivalent in 2009, about 4 percent more than the 2.17 billion tons of the U.S. The measure of oil equivalent includes all forms of energy consumption, including oil, gas, coal, nuclear and hydropower.

Simultaneously, China’s oil import dependence last year exceeded 50 percent for the first time. China produced 189 million tons of crude oil of its own, but imported an extra 199 million tons. Beijing’s officials predict that the hunger for oil to fuel China’s rapid economic growth will cause the oil import dependence to grow to 65 percent by 2015 and 70 percent by 2020.

But for a really scary scenario, the Council on Foreign Relations, the leading U.S. think tank, has produced a graph that looked at historic patterns of oil consumption in terms of economic development and projected them forward to see the prospects for a booming China and the world.

CFR’s Maurice R. Greenberg Center for Geoeconomic Studies found that as a country’s per capita income increases, its per capita oil consumption also increases. No surprise there, but the growth in oil consumption is modest until a country reaches per capita income of $15,000, and then it takes off rapidly, before leveling off at about $30,000 per capita income. South Korea and Taiwan illustrate the trend. The CFR points out that South Korea, which consumes 3 percent of global oil output, is too small to disrupt oil markets. But it warns, “China is too big not to disrupt them.”

It then projects China’s oil use forward and assumes that China’s per capita oil consumption reaches South Korea’s levels today. The implications are horrendous: “China’s share of global oil consumption would increase from today’s 10 percent to over 70 percent,” says CFR. If you turn the forecasts round and assume — surely optimistically since China’s population is more than four times bigger than that of the U.S. — that China’s share of global oil consumption stays at the same level as that of the U.S. today — 22 percent — the scenario is equally problematic.

To cap China at 22 percent, “global oil output would have to increase by a massive 13 percent per annum over 10 years, well beyond the 1 percent growth averaged since 1975,” says CFR’s report. It adds: “This rate of growth is inconceivable, even if vastly more expensive sources of supply, such as the Canadian oil sands, were developed at breakneck speed.”

Other studies have also forecast soaring Chinese oil demand. One projected by 2020 China’s demand for oil, if unchecked, would be 55 million barrels a day, as compared with current total global production of about half that figure.

The CFR report ends with a copout. If China’s recent pace of economic growth continues, it will surpass South Korea’s current per capita GDP shortly after 2020, “meaning that the world may be forced onto alternative energy sources much sooner than it realizes.” One might add — if world leaders are lucky enough and thoughtful enough to avoid wars for control of oil and other energy sources, or maybe the water wars will come first.

The CFR projections do however provide an early warning of how unsustainable current energy consumption is becoming, not least because they look only at China and ignore India, Indonesia — now no longer a member of the oil exporters’ club because it is a net oil importer — Vietnam and other rapidly growing economies.

So what is being done? Signals from markets are very short-term since markets respond to every passing breeze of a rumor, especially if it is about a possible typhoon or hurricane approaching an oil production platform. The U.S., depressingly, remains in thrall to Big Oil, and uses more oil per person than other countries. It would be political suicide for any candidate hopeful for office to suggest raising prices, even though the last oil crisis, when prices leaped to $140 a barrel, demonstrated the powerful message that high prices send.

U.S. pump prices are about $2.85 a gallon (3.8 liters), which translates to 73.4 cents a liter, or about half of the price paid in Europe or 40 percent of the Hong Kong price. Japan’s motorists are relatively lightly taxed by European standards at $1.30 a liter. Critics contend that without tax breaks and other financial assistance for oil companies, the real price of oil in the U.S. would have to rise to between $8 and $11 a gallon.

By the standards of the U.S., Beijing has pursued an enlightened policy, particularly in seeking more efficient energy use and encouraging renewable sources, such as solar and wind power, in which it is way ahead of the U.S. But China can be said to be more enlightened only in a narrow sense and with a shortsighted vision. It is still pursuing an oil-based economy that has seen it do business with rogue states in its attempts to diversify its sources from the unstable Middle East, which provides 80 percent of its supplies.

China is encouraging car ownership and motor vehicle production rose to 13.79 million units last year, way ahead of Japan’s 7.93 million and the U.S.’s 5.71 million. Beijing is still not sending the right message via the gas pumps, where fuel costs 94.6 cents a liter.

If you look at the world as a whole, not a lot is being done in terms of political planning for an oil-free world. At the Copenhagen summit in 2008 it seemed as if political hot air of fine promises could be turned into an alternative fuel, then the world might still be saved. But environmental issues have almost been taken off the table of global concerns.

The oil-producing countries themselves are encouraging oil consumption like there is no tomorrow with their low prices, ranging from 2.3 cents a liter in Venezuela to 16 cents in Saudi Arabia and a relatively expensive 40 cents in Iran.

But as the CFR report suggests, the writing is on the wall unless the world both curbs oil use and discovers alternative fuels.

Kevin Rafferty is editor of PlainWords Media, a consortium of journalists dedicated to issues of global economic development.

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