What's Behind China's Energy Surge?

08/04/2010 9:55 am EST


Jim Jubak

Founder and Editor, JubakPicks.com

Who is now the biggest energy user on the planet?

Not the United States anymore. The US economy is now number two, according to the International Energy Agency (IEA).

In 2009, China took over the number-one spot, consuming 2.25 billion metric tons of oil equivalents. The US consumed just 2.17 billion metric tons. (The actual energy consumed was in the form of oil, coal, natural gas, nuclear, and alternatives such as wind and solar.)

Chinese officials have disputed the International Energy Agency numbers. The IEA’s data are “not very credible,” Zhou Xi’an, head of the National Energy Administration’s general office, told a press briefing in Beijing on July 20. “We think that’s because of a lack of knowledge about China, especially about China’s latest developments of energy conservation and renewable energy.”

China plans to spend $740 billion in the next ten years developing cleaner sources of energy to reduce emissions from burning oil and coal.

Of course, using alternative rather than conventional sources has nothing to do with how much energy China consumes—just with its sources (and how much carbon the country emits in producing the energy it needs).

The case for believing the International Energy Agency numbers are pointed in the right direction are China’s runaway economic growth (compared to the United States) and the relative inefficient use of energy by China’s economy (even in comparison to the notoriously energy-inefficient US economy.)

China’s economy grew by 8.7% in 2009 before accelerating to 11.9% in the first quarter of 2010 and 10.3% in the second quarter. The US economy contracted by 2.4% in 2009. First quarter 2010 growth was 2.7% in the United States.

And even though the United States lacks a meaningful national energy conservation policy, higher energy prices have prompted an increase in US energy efficiency of 2.5% annually from 2000 through 2009. In the same period, China’s energy efficiency grew by just 1.7% annually. (Energy efficiency is a measure of how much energy an economy uses per unit of production.)

The big effects of China’s move to number-one energy user will be, first, to increase pressure on energy supplies in general. (For example, China’s oil imports have almost doubled since 2005.)

And second, to increase pressure on the supply of the kinds of energy commodities that China’s economy uses most heavily.

For instance, while the United States remains the world’s largest consumer of oil (843 million metric tons in 2009 to China’s 405 million), China far outstrips the United States in coal consumption.

In 2009, China burned 1.54 billion metric tons of coal, compared to 498 million tons in the United States.

Full disclosure: I don’t own shares of any company mentioned in this post.

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