Hummer in a Peak Oil-Fearing Era: Why China Couldn't Buy the Brand

Last Updated Feb 25, 2010 7:47 PM EST

General Motor's (GMGMQ.MX) failure to sell off its Hummer brand to Chinese manufacturer Sichuan Tengzhong Heavy Industrial Machines highlights the country's hyper-awareness of its growing energy appetite.

The Chinese government's decision to scuttle the deal suggests it's worried whether the global oil supply can meet the country's energy demands in the long-term. China wants to promote efficient, gas-sipping cars, not massive SUVs with poor fuel economy.

China consumed an estimated 7.8 million barrels of oil a day in 2008, making it the second-largest oil consumer in the world behind the U.S. And it's expected to grow with oil demand reaching 8.2 million barrels per day this year. China's concerns about supply can be summed up by its frenzied mission in the past year to lock up as many energy resources as it can, using every conceivable method. It has lent money to credit-poor countries in exchange for long-term deals for oil and gas. China has aggressively pursued stakes in energy projects; tried to buy up independent exploration and production companies; and landed one of the few contracts to develop Iraq's oil fields. If China had allowed the Hummer deal to go through, it would have been more than just an endorsement of gas guzzlers. The government would be sending an anti-energy conservation message. And it's a risk China can't take given that its car sales topped the U.S. this year, making it the world's biggest market for automobiles. Hummer's inability to find a buyer in China -- or anywhere else for that matter -- suggests a changing world view. The Hummer brand simply can't survive in an era where a growing number of business and industry leaders believe peak oil - the much debated moment when the world can no longer produce the oil and gas it needs and wants -- isn't far off. And even those who scoff at peak oil believe the world will face a supply challenge and will need to increase oil and gas output to 100 million barrels a day, or about a 17 percent increase over today's rate.

Graphic from the International Energy Agency's World Energy Outlook report