[SUITERS] GM, for one, says by the end of this year, the Chinese will have 17 million more cars on their already clogged roads. That would break last year's sales record by more than 30%. So even as the Chinese try to kick the habit, they are going to need more oil than ever before. In China, Tyler Suiters, "energyNOW!"

[McGINNIS] Well, you remember what Washington did for GM and Chrysler during the economic downturn, right? Well, now Beijing is also on the verge of investing more heavily in its car sector -- as much as $15 billion in R&D funding for EVs and hybrids. In the weeks ahead on "The China Factor," Tyler will be looking at other stories inside China, including a closer look at what it's doing, in some cases better than the U.S., to protect the environment.

Well, joining us now for theMIX to talk about China's impact on world energy and the world's oil outlook is Rob Sobhani. He's president of Caspian Energy Consulting. Also Roger Ballentine -- he's president of Green Strategies Incorporated. And Elliott Gue is editor of The Energy Strategist and The Energy Letter. Welcome to everyone.

[SOBHANI] Thank you very much.

[McGINNIS] Let's start with this China factor, this explosion of oil consumption, energy demand in China. As standards of living are going up there, these are a people with the means to now compete for energy resources. Roger, would you say that anything is materially going to change for Americans?

[BALLENTINE] Well, I think certainly in the longer term, we're looking at potential major impacts that are both economic, environmental, and potentially in terms of security, by having the enormous entry and increase in the consumption and demand for energy resources presented by China. The world is too small, China is too big, and energy is too interconnected for us not to be impacted by it, and it will be in a number of different ways.

[McGINNIS] 2,000 new cars a day, and that's just in Beijing alone. So China now the biggest customer for world oil on the market. What do you see as -- What will we notice?

[SOBHANI] You know, it's interesting. Put it in historic perspective. In the year 2000, they were consuming 1 billion tons of oil. Today it's more than the U.S. They're consuming 2 billion tons of oil, and they are consuming 25% of the world's energy. If we focus too much on China, we lose focus on what we in the United States should be doing -- clean energy, alternative energy, legislation. Our politicians should wake up and start allowing private-sector America to do what it does best, which is innovate. If we don't do that, I agree, China's going to eat our lunch. But we are Americans, and we can do it.

[McGINNIS] But China's oil -- Just talking about basic competition for world resources. China's oil demand a day is projected to triple -- this is according to new I.E.A. numbers -- to 13 million barrels a day. We're not talking about, Elliott, running out of oil. We're talking about a nation now that's able to compete. What are the implications for us?

[GUE] Not only is their consumption increasing, but it's becoming harder to increase oil supply to meet that demand. So the implications are really higher prices for the entire world. You know, what kind of reserves are companies going after to supply all this demand now? They're going after deepwater -- much more expensive than traditional onshore fields. They're going after unconventional supplies. In the United States now, we're drilling wells which are 10,000 feet -- the lateral segments -- to produce some of these unconventional fields. Oil sands -- If you look at the I.E.A.'s report, they're forecasting a big jump in oil-sands production to meet all this demand. So it's not only that their consumption is going to surge, and that's going to mean a lot more world consumption, but it also, on the supply side, is becoming harder to meet that demand.

[BALLENTINE] Oil is very unique. It is a world market, it's a global commodity, and it is very much an imperfect market dominated by many low-cost suppliers who have most of the resources. I absolutely agree that we're looking at higher prices, in significant part because of China and the rest of the developing world increasing their demand. The problem is that very often the prescription to deal with that in response is, "We need to increase supply." That's a fool's errand.

[McGINNIS] We're going to be talking about what the U.S. can do, how the U.S. can cope with this changing energy picture. We're going to take a quick break and come back with that. Our panel will be joining us again to talk a little bit more about that and also fuel cells -- highly efficient, low emissions, and all off the grid. Are these the energy sources of tomorrow? We'll meet researchers trying to make it happen.

[BREAK]

[MAN] Hello, I'm an Electric.

[MAN] And I'm a Gasoline.

[ELECTRIC] What you got there, Gas?

[GAS] It's just a little something I threw together -- a gasoline-powered cell phone.

[ELECTRIC] It seems complicated.

[GAS] Not really. It's as easy as gassing up a car.

[ELECTRIC] Okay. Let's see how it works.

[GAS] Okay. Here we go.

[Engine turns over]

[GAS] What? No, I got to go by the gas station first. Hey, you got a couple of bucks I can borrow?

[Engine sputters]

[GAS] See? [Coughs] Easy.

[Engine sputters]

[ELECTRIC] I'll stick with plugging in.

[TEXT ON SCREEN] PluginAmerica.org

[END BREAK]

[McGINNIS] And welcome back. Our MIX panel is back again to keep our discussion going with Rob Sobhani, CEO of Caspian Energy Consulting; Roger Ballentine, president of Green Strategies; and Elliott Gue, editor of The Energy Strategist. So we have outlined sort of the picture here -- what is happening with China's role in the future of energy -- future world oil and energy demand. Let's get to how the U.S. should cope. And, Rob, you were talking about one solution you believe in is tapping more domestic resources.

[SOBHANI] Absolutely. We've got 1.5 trillion barrels of shale oil in our country. We have the brains to do it. In fact, Shell is experimenting with in situ methods to melt the oil and bring it to the surface. And so I believe that we should focus on regulation that will allow for companies to start exploiting this resource in our own backyard instead of worrying about China.

[BALLENTINE] Look. I think one of the great misrepresentations that have been put forward to the American people is the benefits of domestic oil production. There are reasons to develop our domestic resources, but there are things that are not reasons, and one of which is to control costs and control prices. Drilling domestically will not lower costs for the American consumer, period.

[McGINNIS] What will? What's your answer?

[BALLENTINE] The only way it's going to happen is for us to provide alternatives. Because the world energy market, particularly for the reasons that you stated with China, those prices are going up no matter what we do, and it is a world market.

Let me give you an example. When the moratorium went into effect six months ago, whenever it was, the single largest non-OPEC-controlled field of oil in the world was shut off. Oil prices went down. We cannot impact global oil prices in the United States. We're not going to be able to do it.

[McGINNIS] You have seen the world energy outlook from the I.E.A. Oil remains the backbone of transportation. Coal remains the backbone of electricity production. What is realistic here, looking at alternative energy?

[GUE] I think coal and oil are going to -- I think fossil fuels generally are going to remain, you know, the majority of world energy production.

[McGINNIS] No matter what we do.

[GUE] No matter what we do. Alternatives are great, and they sound great on paper, but the reality is that they're a very, very small part of the global energy mix right now. And I think that's going to remain the case for a long time coming. You talk about China, but look at India. India's going to be the world's fastest-growing importer of coal over the next five years. They're building lots of new large-scale coal-fired power plants. And in many cases, it's a lot better than what we're doing in the United States, where we're not building new coal-fired power plants. We're using 30-, 40-year-old coal-fired power plants. So I think that fossil fuels are going to be the bedrock of global energy consumption for three or four decades, at least, into the future.

[McGINNIS] And listen to what Fatih Birol says. He is the head of the I.E.A. "The gas glut" -- he's talking about natural gas -- "will be with us 10 more years. Cheaper gas prices will put additional pressure on renewable energies, especially in the U.S. and Europe. If natural gas is as plentiful and cheap as we think, then life for renewables will be even more difficult." Elliott, do you see what's happening with natural-gas prices and supply hurting the development of renewables?

[GUE] Well, absolutely. If gas is expected to remain relatively cheaper, as it is right now, for a long period of time, it makes it much more attractive than other sources of energy, which are more expensive. The other thing, I think, about natural gas that doesn't get as much attention is the natural-gas liquid side of the equation -- things like ethane, butane, propane. They're becoming a much more important part of industrial demand for energy in the United States -- in other words, as a petrochemical feedstock to produce plastics and that sort of thing.

[BALLENTINE] That quote is only half the story, because I agree that low natural-gas prices presents a challenge for renewable energy. There are policies that are being considered and might be considered, including a price on carbon, which would adjust that to a certain extent and help renewables. The real story here is, I think, what extensive supplies of natural gas do for coal. And I think as we in this country are able to shift some of those old coal plants into more state-of-the-art, combined-cycle, natural-gas power plants, you can see a lot of that gas glut taken up in the power sector at the cost of coal. So I think both coal and renewables are impacted by natural gas.

[SOBHANI] We can also do both, though. I mean, according to GE, if I'm not mistaken, if you cover 7% of Arizona's landmass with solar panels, you can provide electricity through the entire United States. So you can do solar, you can do gas, and you can do oil shale. And all of a sudden, in the United States -- not all of a sudden, but over several years -- will be energy independent, basically. So I think we should try all of them, and not necessarily one avenue is the silver bullet for us.

[McGINNIS] We're going to have to leave it there. The one thing, I guess, we can agree on is that China's probably going to be taking a leadership role in a lot of these areas, including renewables. I want to thank all you guys for being with us. Rob Sobhani, Roger Ballentine, Elliott Gue, thank you so much.

[BALLENTINE] Thank you.

[McGINNIS] We appreciate it.