Michael Levi, writing a newish blog at the Council for Foreign Relations, disputes this. He points out that it in all three countries, transportation make up only a small fraction of oil supply (much less than in the US), and it might be expected that oil usage in the industrial and electrical sectors will be much more elastic in an era of high oil prices than transportation usage. Therefore, extrapolating Japanese and Korean experiences from the past will seriously overestimate future Chinese oil demand growth.
To assess this a little more closely, it's worth noting that the EIA's reference case scenario these days involves fairly high future oil prices:
Oil prices grow to cross $100 in 2017, and then grow more gradually above that afterwards. Since we have some experience in recent years with oil prices in the range of $60-$100, we can see how Chinese oil growth was affected by them (data from BP):
As you can see, in the last few years when prices have been $60 or above, Chinese oil consumption has grown in the 4%-7% range, annually. Clearly the price spike suppressed growth, but not down below 3%.
So I guess I come down in the middle of this debate. I agree with Michael that the very straightforward analogy to Japan and Korea that Steven is using seems likely to be oversimplified and exaggerated in a world of high oil prices. At the same time, I'm with Steven that the EIA must be underestimating: it's hard to see how a growth rate of 2.7%/ year can be consistent with both the recent performance of the Chinese economy and the EIA's reference price case.
Probably, either prices will be higher, or Chinese oil consumption growth will be faster than the EIA is thinking.
So, China will need to acquire even more fossil fuels in the near future, which means Peak Oil will peak even faster...
ReplyDeleteThere is another worrisome aspect to the comparison between China and Japan. Admiral Yamamoto bombed Pearl Harbor in order to eliminate the Pacific Fleet so that Japan could have a secure supply route past the American-held Phillipines for oil tankers from the Dutch East Indies...
If you take BP global statistics then a global consumption of just 1% per year and oil is rationed - run out effectively - by 2046. But if you push it up to 3% it's all over by 2039. That's just 28 years away. The monetary system we currently use, where the lucky elite capitalists are able to control democracy - turning it into a plutonomy - where bankers put puppets into power - will surely fail. As we already know technology destroys jobs. Without jobs you have no tax. No tax means the elites get richer but the poor get poorer. What happens when very high numbers of out of work don't get their benefit cheques paid? Anyone heard of the French Revolution? If you cannot feed people because the price of bread has been pushed up by hyperinflation, people won't stand back. We're seeing it in Libya and Syria. We've seen it in Egypt. It will start to happen in Spain, and spread across the USA, and Europe. The UK surprisingly is the most vulnerable relying on the aircrat and the ocean to bring it food at ever increasing prices - oil makes 80% of the food, and transports 100% of it around the planet! Without cheap oil the elites are doomed. They will either have to butcher everyone or surrender power to new govts who will be as inept as the current ones. Overpopulation has been built on oil, without it, there will be massive suffering. If yo uthink that renewables will bail out you out, read David Mackay. Where is the replacement for oil? There isn't one!
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