Monday, August 02, 2010
China Surpasses US as Top Energy User
In a rather stunning development, China has surpassed the US as the world's biggest energy consumer. The tremendous growth of China's economy has been predicated on massive energy consumption, and passing the US reflects the nation's rapid and enormous expansion.
According to the International Energy Agency (IEA), China consumed 2.252 billion tons of oil equivalent last year, about 4% more than the US. Oil-equivalent represents all forms of energy consumed, including crude oil, nuclear power, coal, natural gas and renewable sources, such as hydropower.
If there was ever a doubt, the findings reveal China to be a first-class industrial giant.
With a population of 1.3 billion people, China outnumbers the US by one billion citizens. The need to provide energy for all of those people is transforming global energy markets and increasing the global demand for oil. That, in turn, is affecting prices.
And with 20 percent of the global population, China's enormous demand will continue to drives oil costs.
Given that oil is a finite resource, China's demand and consumption ultimately affects the US. There will be great competition for the world's remaining energy resources.
China's new position in the energy-consumption spectrum represents a sea change because the US had been the world's biggest overall energy user since the early 1900s.
China's energy demand has increased quite rapidly; just 10 years ago, its energy consumption was half that of the US. Most energy experts had expected that China wouldn't surpass the US for another five years.
However, China's demand for energy grew four times faster than the IEA had predicted.
While US industrial activity has ebbed due to the recession, China has continued to experience annual double-digit growth rates.
In the early 1990s, China became a net oil importer for the first time as its demand finally outpaced domestic supplies. So while China was previously a major exporter of both oil and coal, it is now heavily reliant on imports.
This has led to China striking development deals with other oil rich nations, including such global hot spots as Iran, Sudan and Saudi Arabia, which now ships more oil to China than the US.
America's robust appetite for Chinese exports significantly helps to pay for the Asian nation's purchases of foreign oil.
China's enormous energy demand will also affect global climate change. In 2007, China passed the US as the world's largest emitter of carbon-dioxide emissions and other greenhouse gases.
According to Fatih Birol, the chief economist at the IEA, China's surging appetite for energy will require a massive and rapid infrastructure build out. China will need to construct some 1,000 gigawatts of new power-generation capacity over the next 15 years — about equal to the current total electricity-generation capacity in the US.
That is simply amazing. The US achieved its current capacity over a period of many decades. Yet China's growth seems to be on fast-forward.
China's growing energy demand and consumption will affect the US (and the rest of the world) in manifold ways, not the least of which is economically.
Over the past century, the growth of the US economy into the global leader was predicated on energy availability and consumption. This new radical shift could put that position into play.
Whereas the US once took its position as the dominant global player and energy / resource user for granted, it can no longer do so. China will now be competing with the US for vital resources, including oil. The competition ill be fierce, and costly.
The US, with just five percent of the global population, uses 25 percent of the world's oil. But that is not a birthright. Our ability to obtain all that oil is what has made the US the world's political, economic and military leader. Yet, we've suddenly got ourselves a large rival with very deep pockets, thanks to our purchases of Chinese goods.
The US will have to increasingly rely on energy efficiency as the quest for energy resources becomes more competitive.
But while China will spend $738 billion on clean energy over the next decade, the US can't even pass an energy bill — even as Big Energy lobbyists continue to water it down.