Monday, April 29, 2013
Here is a graph of China's oil consumption according to two data sources. The annual data run 1965-2011 (2012 is not available yet):
This has obviously grown hugely. If we look at the average growth rates over the prior decade at each year, that looks as follows (blue curve, left scale):
Growth has been stable in a band between 6% and 8% for several decades, with 7.2% being the figure for the latest decade available. The red curve on the right scale shows real oil prices over the same time period, demonstrating that Chinese oil consumption growth going back into the eighties is not at all price sensitive.
If we note that Chinese population is four times larger than the US population, and 2011 US consumption was almost 19mbd, we see that Chinese per-capita consumption is still only something like 1/8 of that of the US. So there's a lot of room to grow still. Also, China is in the middle of building an expressway system that will be substantially larger than the US freeway system.
If, then, Chinese consumption were to continue to grow around 7% out through 2025, it would look like this:
That's another 15mbd in the next thirteen years or so. Just for China. If you compare this to things like the extra 4mbd you might hope for from tar sands in this time frame, or the 2mbd that global crude supply has increased since 2005, you can see that this is going to stress the global oil system a lot. Either the global crude supply is going to grow a lot faster than it has been, or OECD oil consumers are going to have to consume a great deal less than they are now, or China (and other rapidly growing consumers) are going to have to slow down a lot.
Whichever is the case, it's hard to see how any combination of the above happens on the necessary scale without prices a lot higher than the $100-$120 we've been paying in the last few years. The comparative truce in the oil markets during 2009-2013 seems like it cannot last forever.
I noted a few months back that the EIA's data showed Chinese consumption falling 4% in 2011. That didn't seem very plausible and I speculated they had some data problem. That now seems to be confirmed as they've extensively revised their numbers and the 2011 fall has gone away. Here's what they show now:
Here's what it was before: