Peak Oil is You
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Page added on April 29, 2013
China is using up oil faster than we can produce it
Maybe you’ve heard that North America is producing a lot more oil these days, courtesy of fracking, tar sands and other new sources. The Atlantic has a nicely reported cover story on the whole phenomenon by Charles C. Mann. Headline: “We will never run out of oil.”
It’s a great article, but here’s an key bit of additional context. Stuart Staniford has some great charts looking at the rapid growth in Chinese oil consumption over the past few decades. He’s also done a simple extrapolation to see what China’s oil demand would look like if it kept growing at 7 percent annually for another decade — hardly a wild assumption:
Things would get very interesting. By 2025, in this hypothetical, China would be consuming 15 million barrels per day more than it does today. “If you compare this to things like the extra 4 [million barrels per day] 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,” Staniford writes.
China helps put everything in perspective. There’s a lot of hype, for instance, about the “tight oil” boom in North Dakota. At last count, the state now produces about 750,000 barrels of oil per day. But as analysts at Barclay’s have pointed out, tiny swings in China’s appetite for crude can easily gobble all of that up.
So what happens if oil supplies can’t keep up with the rise in Chinese demand in the decades ahead? Prices would start rising. And one of three things would have to happen, as Staniford explains: ”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.”
Pay attention to that middle option especially. In a recent interview, energy analyst Chris Nelder explained why growing oil demand from places like China and India would likely force Europe and the United States to curtail their own oil consumption:
Right now, all of the new oil consumption in the world is coming from outside the OECD and the developed world. It’s largely coming from in China and India. And that new oil demand is now being met, almost exactly, by declining demand in North American and Europe. …
… The growing economies of Asia get so much more marginal economic utility out of a gallon of fuel than we do. In a poorer country, you might have a couple guys on a moped, burning one gallon of fuel to get to the market and back. They get so much more economic value out of doing that than a construction worker in the U.S. gets in his pickup truck burning 5 gallons per day.
Now, obviously Staniford’s scenario might never come to pass. China’s economy could slow down further in the years ahead, which would cause its demand for oil to drop sharply. (A Chinese recession could create all sorts of other problems, but push those aside for now.) Or maybe some new energy source — electric cars? natural gas? — will put a major dent in oil consumption, either in China or the United States.
In theory, though, China still has plenty of room to grow and burn more oil. And that basic dynamic is worth watching closely. The world might not “run out of oil” anytime soon. But if supplies can’t expand quickly enough to keep up with growing demand, that will put a lot of strain on the system. At that point, we either find new sources of oil or we use less of the stuff — and the latter can happen either voluntarily or involuntarily, through slower economic growth.
9 Comments on "China is using up oil faster than we can produce it"
Plantagenet on Mon, 29th Apr 2013 11:42 pm
Amazing how the WaPo writer got through that entire story about oil production being unable to meet demand without ever once mentioning peak oil.
rollin on Tue, 30th Apr 2013 12:08 am
Soon the patient will admit to the disease. Will it be in time?
BillT on Tue, 30th Apr 2013 1:03 am
Peak oil is also peak supply…
If the ocean were oil and the only pipeline to the refinery was 6 inches in diameter, it does not matter how much oil there is, the production is limited. Production hit a NET peak in 2005 and has been shrinking ever since. NET, not gross. We may produce 4M bbl/day, but if it takes 1M bbl/day of that to get the 4m, you have a NET of 3M bbl.day, not 4M. I would like to see charts showing NET energy for the last 10 years. I’m sure it would show a decline overall.
econ101 on Tue, 30th Apr 2013 2:07 am
Amazing. This author didnt even mention the immense shale reserves in China. There was no mention of any growth in reserves, only growth in demand. Not a balanced article, especially in light of the fact the world has far more oil than it needs.
BillT on Tue, 30th Apr 2013 3:38 am
Econ, it does NOT have more oil that it can AFFORD. THAT is the bottleneck. If $147 oil caused a crash, imagine what $200 oil will do. Or #250 oil. It will end ‘for profit’ capitalism and most of the Western way of life. Permanently.
mike on Tue, 30th Apr 2013 7:27 am
I often wonder what people like econ101 think is actually happening in the world. Everything peak oil theory has predicted has happened virtually on schedule, they are even using the term bumpy recovery (a reference to bumpy plateau)People like econ101 seem to completely misunderstand peak oil, much like the people who don’t understand when it snows more due to global warming. Yes econ101, there is lots of oil left, but we are pretty much at peak extraction, this means economies simply will not be able to grow. Some economies are in complete collapse (southern europe) which will let the party go on a little while for the rest of us, but be under know illusions that we are moving the deck chairs around on the titanic. It’s now a game of who can keep their head above water the longest before social collapse and a neo feudalistic future (with radiation, lots of radiation)
J-Gav on Tue, 30th Apr 2013 11:12 am
Staniford’s hypothesis for China in 2025 will never happen since the country’s economy will slow down, perhaps even falling into recession by then as the huge number of bad bank loans there will necessarily come home to roost.
Kenz300 on Tue, 30th Apr 2013 12:50 pm
Oil is pricing itself out of the market…….
This will increase the use of alternatives.
Bring on the electric, flex-fuel, biofuel, hybrid, CNG and LNG fueled vehicles. We need to diversify our transportation fuels and our choices.
Maybe we will begin to rethink our reliance on the automobile and increase our use of bicycles and mass transit. There once was a time when trolleys ran thru the center of most American cities providing a cheap and convenient transportation option.
We need to make our communities more people friendly and less auto friendly. Walking, biking and mass transit need to become a higher priority.
China and India are the driving force in oil prices. Their increasing demand is outpacing supply and they know it. The pollution levels are choking the cities. That is why they are promoting electric and hybrid vehicles.
BillT on Tue, 30th Apr 2013 3:46 pm
Kenz, alternatives will never be more than a small percentage of the energy use in the US. It took over 10 years to turn over the car inventory when the economy was growing. It will take 15-20 years to do the same thing now that people cannot afford a new anything. So, there will be a few alternate energy cars made and sold, but again, only a small percentage of the total. Nothing will change when the consumer is broke except a decrease in demand of everything.