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2003 November 06 Thursday
China Energy Consumption Growth Complicates Anti-Terrorist Efforts

China's energy consumption is growing rapidly and Chinese economic growth can be expected to raise total world demand and, therefore, world prices for oil for many years to come. This is bad news for US attempts to defend itself against Islamic terrorism and the spread of fundamentalist Islam.

Those who are skeptical about the statistics on the rate of growth of China's economy need look no further than rising Chinese energy consumption figures for a good hard measure of economic activity.

From 1989 to 1996 the installed capacity and electricity generation rose by 9.3 and 9.2 percent respectively. By the end of 2001, the installed capacity had risen from 57.12 million KWh in 1978 to 338.61 million KWh (including 2.1 million KWh nuclear power), and the electricity generation grow from 1978's 256.6 billion KWh to 1483.9 billion KWh (including 17.5 billion KWh nuclear power). Now both China's installed capacity and electricity generation have leapt to world second place.

One big mistake the Bush Administration is making in the battle against Islamic terrorists is that it has no real long term strategy that will have only long term pay-offs. The Islamic terrorist threat will not end in the next 5 or 10 years regardless of what strategies are pursued. A big advantage could be gained by the development of energy technologies to reduce the value of oil reserves in the Middle East and reduce the amount of money flowing to the Middle East. Energy technologies that would, once developed, be cheaper to use than current world market prices for oil would displace oil in uses all around the world and, as a consequence, lower world oil prices and lower the amount of money flowing to Saudi Arabia and other Persian Gulf states. This would reduce the amount of money available to spread Wahhabi Islam, to operate madrassah schools, and generally to cause threats to us.

Nobel Prize winner Richard Smalley believes the United States ought to be spending $5 billion per year to develop technologies that will obsolesce fossil fuels. See the update at the bottom of this post for links to his Congressional testimony where he states that he believes our dependence on fossil fuels is a solvable problem. Put that $5 billion dollar amount in perspective. Congress has voted to spend $87.5 billion in Iraq and Afghanistan. We will probably spend even more than that in Iraq and Afghanistan in future years. Consider an even larger context. Douglas Holtz-Eakin, director of the Congressional Budget Office, provides a picture of expected future defense spending.

He said the defense budget, which stood at about $380 billion this year, excluding the emergency spending, could average $472 billion a year through 2009 and $533 billion a year between 2010 and 2022.

The US economy is over $10 trillion per year. The total cost of the 9/11 attack is in the ballpark of about $100 billion. Another larger attack could cost far more. Isn't it time we started to take some large steps toward developing technologies that will reduce world demand for oil as a way to reduce the amount of money available to the Islamists to make trouble for the rest of the world?

China replaced Japan as second largest oil consumer in 2002.

Brent oil prices averaged $ 25.19 a barrel in 2002, according to BP, which was up only slightly from 2001's average price of $ 24.77 a barrel. This price, however, was "well above" the post-1986 yearly average of $ 19.40 a barrel, BP reported. "Prices during 2002 ranged from a low of around $ 18 a barrel in mid-January to peak just before the end of the year at $ 32(/barrel)," the report said. Global oil demand, meanwhile, was "broadly flat," BP said, increasing 290,000 bpd to 75.7 mm bpd from 75.5 mm bpd. "All of the increase is attributable to China where oil consumption increased 5.8 % or 332,000 bpd," BP said.

...

China, meanwhile, accounted for 68.5 % of the increase in global primary energy consumption in 2002 and has become a "major energy consumer and importer," according to BP's report. "Consumption of coal, which accounts for 66 % of Chinese energy use, grew a massive 27.9 %. Oil consumption increased 5.8 %, or 332,000 bpd, accounting for all of the world's oil consumption growth in 2002," BP reported, adding, "China replaced Japan as the world's second largest oil consumer."

...

"Natural gas is the world's preferred non-transport fuel. Outside the former Soviet Union, gas consumption has grown 3.4 %/year over the past decade and its share of total energy consumption is now roughly equal to coal at 24 %," the report said.

How much money is spent buying oil? To use round numbers, 75 million barrels of oil per day times $25 per barrel is $1.875 billion dollars per day of money flowing to buy oil each day. For a whole year that is about $684 billion dollars spent buying oil. With the Middle East possessing about two thirds of the world's oil reserves and with demand and probably prices rising it seems reasonable to expect the amount of money flowing to the fundamentalist Islamic states of the Persian Gulf to rise substantially in coming years.

Keep in mind that in 2002 the economies of the United States and Europe were very weak. So the flat world oil consumption for 2002 is not representative of the long term trend which continues to be toward increasing world oil consumption.

The continued growth of the Chinese economic juggernaut promises to greatly increase the demand for oil. It is going to happen. The effect will be to increase the challenge we face from the Islamists. We need a response that will solve the problem. The Chinese dependence on oil also bodes poorly in another way with regard to our problems with Muslims: The Chinese, mindful of their own growing dependence on Middle Eastern oil, are going to become increasingly inclined to give the Arab oil states anything they want. Weapons? Weapons technology? The Chinese are going to be inclined to say yes to any requests coming from the Persian Gulf states. Our ability to convince the Chinese to refrain from proliferating dangerous technologies will consequently decline.

For a very detailed breakdown of world energy consumption and energy reserves see the BP Statistical Review of World Energy for 2002. (PDF format)

World consumption of primary energy increased by 2.6% in 2002, well ahead of the 10-year growth trend of 1.4% per annum. Reported growth in energy demand of almost 20% in China was behind much of this relative strength: energy consumption in the world, excluding China, grew by less than 1% during the year, reflecting a second year of below-trend economic growth.

Coal was the fastest-growing fuel in 2002 on the back of a huge 28% reported rise in Chinese consumption. World coal consumption increased by almost 7%, well ahead of the 10-year annual trend rate of less than 1%. Natural gas consumption recovered strongly to grow by 2.8% in 2002, while oil consumption was broadly flat for the second year running. Nuclear and hydroelectricity grew by 1.5% and 1.3% respectively.

World coal consumption increased by 6.9% in 2002. However, this was almost entirely a Chinese phenomenon: reported consumption in China rose by an extraordinary 27.9%. Excluding China, world coal consumption grew by just 0.6%, with strong growth of 3.7% in Asia (excluding China), and modest growth in North America of 1.5%, offset by declines of 1% in Europe and 7.8% in the FSU.

See the PDF on page 5 for a geographical view of the world's oil reserves. The Middle East contains about twice as much oil as the rest of the world put together. Rapid Chinese economic growth will ensure that the amount of money flowing to the Middle East to buy oil will increase substantially in future years.

US oil reserves represent less than 4 years of current US oil consumption.

According to the EIA, the United States has 21 billion barrels of proved oil reserves as of January 1, 2000. The U.S. uses about 6.6 billion barrels per year. That is only enough oil to last the U.S. about three and a half years without importing oil from other countries. 84% of the reserves are concentrated in four states. Texas has 25%, both onshore, and offshore. Alaska has 24%, California has 21%, and Louisiana has 14% onshore, and offshore. Since 1990, U.S. oil reserves have dropped about 20%. New oil discoveries made in 1999 were made almost entirely in the Gulf of Mexico, and Alaska. (321 million barrels). All other discoveries were extensions of existing oil fields, or new reservoirs discovered in old fields. (404 million barrels).

US oil reserves are not a solution for US domestic needs. Even if they were the rest of the world would still be sending lots of cash to the Middle East. The existing level and expected rise in world demand for oil is a national security problem for the United States. Energy policy should be treated as an element of national security policy and spending on energy research should be considered as just as important as spending on weapons development, troop deployments, or intelligence efforts.

Update: The situation with the world's oil market going forward is going to get even worse for another reason: world oil production will probably peak within 10 years. Natural gas production will most likely peak a few years later. Even if there are a lot of reserves remaining the problem is that there is a limit to how fast old fields can produce. The oil doesn't move fast enough underground that it can be pumped up rapidly even when a lot of oil is remaining. One big asset the United States has is a lot of great scientific minds in great research universities. It is time to play to our strengths and provide America's university researchers billions of dollars per year in basic research money to explore all manner of questions whose investigation can yield useful discoveries for developing new energy technologies. Do the basic research in the unversities and then let venture capitalists and corporations pay for the commercialization of the discoveries.

Share |      By Randall Parker at 2003 November 06 10:53 AM  Politics Grand Strategy


Comments
vic hemmy said at November 6, 2003 5:33 PM:

Damn good article! - should try to discouage gas -guzzlers on the roads.

Captain Scarlet said at November 7, 2003 2:32 PM:

there are lots of ways around this problem. i'm surprised that you didn't mention some of the things that our government is working on with canada (world's second largest oil reserves) and russia (currently only producing at 25% of their known capacity) to help ease the oil price/supply problem. i personally would like to see an increase in refinement capability in america. it is currently very expensive to build refineries because of all the greenie regulations. we also have seen a drop off in drilling for oil in america because all the "low hanging fruit" has been drilled and new wells are expensive. i think the underlying problem is that oil companies don't see a need to drill or add more refinery capacity because all of those things will drive prices down. so the next step may be to start breaking up the oil oligopolies. starting with exxonmobile.

Randall Parker said at November 7, 2003 2:53 PM:

Captain Scarlet, I do not repeat points from previous posts in every new post I make about energy. If you want to read click thru on my Grand Strategy archives and search "energy" and you will find previous posts. Also, see my FuturePundit Energy Tech archives for more on energy technologies.

I've posted about the Alberta oil sands in the past. Not as great as they sound. They cost a lot more to extract. If you click thru on my links in this article you will even see a description of how the oil sands require the use of two barrels of oil sands oil to get one barrel out. So out of every three barrels of oil dug up with the sand only one barrel comes out and the energy of the other two barrels is used in purification.

Refineries: building more of them will not create oil reserves. Refineries will not lower world oil prices.

Breaking up oil oligopolies will also not increase available oil reserves.

Do click thru on my links which address a number of the issues you raise.

Captain Scarlet said at November 7, 2003 4:48 PM:

oil is a renewable resource. you are right that we have to address the consumption issue. we are running up against the fact that there just aren't many more places to drill and get cheap oil. i'll read through you site more and my apologies that i assumed you haven't done your research. hopefully hybrid cars will become popular. i believe they get about 70 mpg in some models. we need to do more to get russia up to speed with their oil production. it seems they are warming to our help recently with some deals being made.

did you hear about the mystery round that went through an M1 tank in iraq. it made a pencil size hole and lodged in the opposite side of the tank. the military hasn't figured out what it is but i'll bet that china or russia has something to do with it.

M. Simon said at November 7, 2003 7:19 PM:

Five billion a year is a drop in the bucket re: research. If you add in what wind and solar cell companies are doing not to mention coal, oil, and natural gas companies. Boiler makers. Electronic controls companies, generator makers, fuel cell mfgrs., etc. I doubt that $5 bn more a year will change a lot.

Then once the research is done you need deployment. You are talking ten trillion or more to revamp our auto system alone. Figure 100 million autos at $30,000 each. That is three trillion right there. Then you have service stations. Service and repair technology. etc.

Changing such a system is not a five or even ten year job. It is a 5 to 10 decade job.

As with the military the amateurs talk tactics the professionals talk logistics.

The best short term solution is the hybrid vehicle. They are actually in production.

Re: tar sands. What matters is the price. Currently it comes in at $11 a bbl. Given crude selling at $25 to $30 a bbl it is profitable.

Energy technology will not win this war. Soldiers and Western culture will.

M. Simon said at November 7, 2003 7:30 PM:

Did I mention that world oil production has been peaking in the next ten years for the last 100 years?

There is plenty of oil. The only question is price.

In inflation adjusted terms oil prices are still declining.

Bob Badour said at November 7, 2003 8:05 PM:

Captain Scarlet,

Did you read the same post I read? The issue is not the availability of easily extracted crude. The issue is high crude prices putting more resources at the disposal of our enemies.

Current energy consumption is not the problem. Our choice of energy source and our lack of alternatives is the problem.

M. Simon,

What do you see about western culture (or soldiers for that matter) that guarantees victory?

Randall Parker said at November 7, 2003 8:20 PM:

M. Simon, I'm talking about basic research, not refinement of existing technologies. Do you have any idea what the National Science Foundation budget is? For FY2003 NSF gets $4.1 billion. So, yes, $5 bil for university researchers is really a lot of money unfortunately.

World oil production: Have you troubled to click thru to read the post about oil field production peaks? In 50 countries oil production has peaked. In a large number of individual fields production has peaked. Remember that when Little Red Riding Hood kept crying wolf the wolf finally came.

Technology Deployment: the whole idea about making huge advances is that the new technologies will be so cheap that they will be adopted at a very rate. Some technologies are adopted a very fast rate, going from early adopters to widespread use in well less than 10 years. The world is accelerating.

Hybrid vehicles: The ones in production cost too much. I'm all for the concept in theory and if you go read my FuturePundit Energy Tech archives you will find that I've written about a variety of hybrid power technologies including compressed air, compressed hydraulic fluid and battery approaches. Batteries cost too much. Failing a breakthru in lithium polymer battery tech (which is one of the research areas I'd like to see better funded) I expect that will continue to be the case. Air compression might turn out to be the winner.

Soldiers can not win the war. Western culture has seen better days unfortunately. It is not even taught in the universities except as an example of white hegemonic patriarchal imperialistic capitalistic oppression. We need more advantages.

Captain Scarlet said at November 7, 2003 10:15 PM:

bob,
we currently get about 25% of our oil from the middle east. we can reduce that amount if we help russia get their production back online. we can also reduce the price of oil by a multitude of various ways. i'm not convinced we have to be worried about this issue yet. china may not continue to grow (their top 4 banks are currently insolvent and doing nothing to fix the problem). some of the terrorist supporting governments may fall soon. there are a lot of circumstances that have yet to resolve before i'll start worrying.

Randall Parker said at November 7, 2003 11:06 PM:

Captain, The percentage of oil that the US gets from the Middle East is irrelevant. What matters is how much money flows to the Middle East.

Which terrorist-supporting governments might fall soon? Popular uprisings are rare. The last successful Muslim country popular revolution happened in Iran in 1979. Also, if there is a popular uprising there is no reason why we should expect the new regime to be any better.

China's economy slowing: The government can afford to keep the doors of their banks open.

Captain Scarlet said at November 8, 2003 6:49 AM:

randall,
look.. i agree with your theory that we need to be worried about china driving up oil prices. however, there are plenty of ways we can avert high prices if we take action now. because we only get 25% of our oil from the ME, we can make the choice to lower that percentage by getting more oil from other countries by helping other countries develop their oil production thereby reducing the amount of money that goes into terrorist supporting countries. besides, terrorist have shown that they can be very frugal and attack us with our own equipment so cutting off their money is going to be difficult. we would do better to use our position in iraq to spread democracy around the ME.

have you noticed that syria just allowed for a two party system and elections? have you noticed that iran is a tinderbox and very well could be the next uprising? have you talked to anyone from saudi arabia and asked them how much they hate the house of saud? people are moving from other ME countries to iraq so they can have a chance at living in a democracy. what is happening there now will not be so easily dismissed by past history.

as for china: the government can afford to prop the banks up and thereby make the problem worse. they will eventually have to deal with the problem. right now, our government is putting massive pressure on them to float their currency in the open market instead of fixing it a set amount. the chinese economy will slow down very soon or it will explode in a wasteland of debt like we have never before seen. i'm thinking it will be the latter.

Bob Badour said at November 8, 2003 9:00 AM:

Captain,

While I have not had direct contact with people who have family in China in a couple years, the last time I did China was experiencing massive unemployment on a scale inconceivable to the west. China has a lot of room for growth.

If we reduce our use of ME oil without introducing cost effective alternative energy sources, other countries will just buy more ME oil. The net effect will be zero because total demand will not change.

Political dissatisfaction has been widespread throughout the middle east for a couple centuries at least. As Randall pointed out, revolution is rare in that part of the world in spite of massive disenfranchisement.

The direct cost of a single attack is irrelevant to the indirect cost of indoctrinating millions of children to hate the west and to hate liberal democracy. As Rumsfeld's recently leaked memo indicates, the key to victory is reducing the number of terrorists faster than our enemies can grow more.

Randall Parker said at November 8, 2003 9:57 AM:

Captain,

I'm all for helping Russia develop their oil fields and pressuring Mexico to privatize their oil industry so that it can develop more rapidly. We ought to have more researchers working on cleaner ways to extract energy from coal (and I've even posted on research at Brookhaven on bacteria for releasing methane from coal). But we should treat the attempt to rev up fossil fuel energy production as a temporary measure to make things less bad in the short run. We need to start now to vigorously work on better and more complete solutions for the medium to long term.

Syria: Iran has elections. That has done what exactly? The Middle Eastern countries have a long record of copying the form but not the substance of Western liberal democracy.

Iran as tinderbox: Lots of bloggers back in May were predicting a July uprising in Iran on some anniversary date of some sort. I predicted otherwise and got a lot of arguments on why I was wrong. Then suddenly a few months later some of those bloggers started to wake up and back pedal. Iran's government has firm control. Read my past posts on Iran in the Axis of Evil archive and you can see why I don't think that revolution is going to happen there any time soon.

We aren't going to solve our problems by use of wishful thinking about a collapsing Chinese economy or an overthrow of the Iranian government.

Captain Scarlet said at November 8, 2003 10:16 AM:

Randall,
it isn't wishful thinking. china has immense problems adapting to a capitalist economy. within 10 years they will either slow down or outright collapse under the burden of growning too fast. they simply cannot sustain the level of growth they are having with the level of incompetence that the government is displaying. something will have to give. i know chinese businessmen that are banking on the collapse of the government within 10 years. time will tell if they are right.

Re: Iran, Turkey has a functioning democracy so it isn't a far fetch to think other muslim countries will too. the difference being that iran let the mullahs control the army and by default allowed them to run the country. turkey doesn't have that problem.

Randall Parker said at November 8, 2003 10:56 AM:

Captain,

Banking on a government to collapse in order to reduce the amount of money flowing into the Middle East is, yes, wishful thinking. I have a dream: The North Korean regime, the Mullahs in Iran, the Saudis, and perhaps a couple of others to be overthown by their own people and replaced by friendlier governments as a way to solve our problems with terrorism. But, hey, I know I'm dreaming.

The fact that Turkey is not controlled by mullahs is nice. But Iran is.

greg m said at November 9, 2003 6:06 AM:

Interesting article I found by way of Samizdata blog. If this
technology works, our dependence on imported oil is over. The
article is in Discover magazine and is referenced by the Samizdata
blog entry on Nov. 8.

Captain Scarlet said at November 9, 2003 8:03 AM:

you can relax now.

Randall Parker said at November 9, 2003 9:21 AM:

Greg, Captain, I've written about Changing World Tech before on FuturePundit.com at the bottom of this post and expressed serious skepticism that this technology will provide a significant portion of our energy. The reason is simple: there is not enough biomass that is concentrated to use for this purpose. Building a factory, as they have done, at a turkey processing plant provides them with a location that brings a lot of biomass together. But there are not enough such locations.

greg m said at November 10, 2003 9:13 AM:

Randall:

Is this statement incorrect?

"Just converting all the U.S. agricultural waste into oil and gas would yield the energy equivalent of 4 billion barrels of oil annually. In 2001 the United States imported 4.2 billion barrels of oil. Referring to U.S. dependence on oil from the volatile Middle East, R. James Woolsey, former CIA director and an adviser to Changing World Technologies, says, "This technology offers a beginning of a way away from this."

-quote from the Discover Mag about "Thermal depolymerization"

If this article is correct, then oil imports will be a thing of the past,eh?
If the article is wrong, then what's specifically is wrong with it?

Randall Parker said at November 10, 2003 9:33 AM:

Greg,

A few points about the CWT claims:

1) What do they define as "agricultural waste"? Do they include corn stalks and tomato plants left in the fields? Do they include the roots left below ground? Or are they (and this seems very unlikely) referring to wastes produced by factories that process harvested plants and animals?

2) What would be the cost (including energy cost) of collecting and transporting the waste to a processing facility?

3) Are the agricultural wastes as energy dense as turkey waste? My guess is that they are not and that CWT hasn't done enough homework to be certain.

4) The CWT claims seem especially suspect to me because Jeff Dukes of U Utah says it would take 22 percent of all land plants to yield the energy the world consumed in 1997. Well, the US has a pretty small fraction of all land plants. Remember the density of biomass per acre is much higher in places like Brazil and Indonesia near the equator. Agricultural waste is a very small fraction of total US land plants. At the same time, the US uses a quarter of all the world's energy.

If the CWT people want to provide much more details underlying their claim I'd like to hear the details. But I don't think the agricultural waste could add up to what they claim it does. Again, I want to see them do the sort of homework that Jeff Dukes has done.

greg m said at November 10, 2003 11:52 AM:

Randall:

Points well taken. However, I think Duke's numbers are also off a
bit. I did a few calculations on those numbers and it seems that
every man, woman, and child in this country used more than 6000 kwh per
month in 1997. I don't buy that. I think the numbers could be off by
as much as a factor of 10.

Randall Parker said at November 10, 2003 12:06 PM:

Greg, Keep in mind that most energy used to generate electricity is lost before the electrons enter your house. Also, industry and agriculture use a lot of power.

You could send Dukes an email and pass along your calcs and see how he responds.

Also, I can tell you the US uses (at least the way the Department of Energy calculates it) about 100 quadrillion Btus of energy per year and we have about 300 million people. So what is the conversion factor between Btus and Kwh? A quick glance thru the results of this search suggests that there are 3412 Btus per Kwh. So 100 quadrillion divided by 3412 divided by 12 divided by 300 million would give the approximate number of Kwh per month per person. That gives me 8.14 x 10^3 KwH/Month. So about 8000 which is ballpark with Dukes' number. You see an error there? I just did it once with a calculator that has an unintuitive way of doing exponential notation and so I might have made a mistake.

Captain Scarlet said at November 10, 2003 7:57 PM:

i'm not a scientist or anything but how much energy is expended retrieveing oil from underground. when you look at the cost of drilling, shipping, processing,etc.. is it cost effective compared to other alternatives?

Randall Parker said at November 10, 2003 8:18 PM:

If anyone else is interested in the Changing World Tech biomass energy extraction technology also see the debate over on Samizdata.net at this post. I will remain skeptical of the potential of that technology to provide a substantial portion of our energy unless someone can provide convincing evidence that there is enough energy in biomass to add up to a substantial contribution. So far the only attempts to make scientific calculations I've seen (e.g. Jeff Dukes' work) suggest that there just is not enough biomass to make a difference.

BTW, anyone ever notice the price of firewood? It is an expensive way to heat a house in most areas.

Tim Kozusko said at June 8, 2005 6:11 AM:

You state the following:
ď...the United States has 21 billion barrels of proved oil reserves ... The U.S. uses about 6.6 billion barrels per year. That is only enough oil to last the U.S. about three and a half years...Ē

There are other sources that place the total per year use at over 7 billion barrels but that isnít what bothers me about your statement. As so many do, you've used arithmetic where you should be using mathematics.

Your calculation is based on current use. But the current rate of use is increasing at a rate that is proportional to its size - in other words, exponentially. No one can claim to really understand this problem without understanding that fact. Projections of resource longevity that are based on no growth are committing errors of omission.

Using 2.5% per year growth (average over the past 40 years) our oil would run out in less than three years. And before you reply that it is only a matter of a few months, those few months are a substantial percentage of the three years. In fact, if we were to have seriously underestimated our reserves and actually had ten times as much oil, it would only last an additional 20 years or so, far less than your calculations would imply. In exponential growth the actual amount of resource left almost becomes irrelevant compared to the growth rate.

In each period of doubling (annual rate divided into 70, or 28 yrs in this example) more resource is used than all previous use combined. Welcome to the world of exponents.
And by all means, donít take my word for it. Be skeptical and do the math for yourself.
Otherwise, nice piece of work. Energy independence is the key to our security and it's not even on the moron-in-chief's radar screen. Keep spreading the word.

Bonaventure said at July 2, 2009 10:25 AM:

Hello. Know, first, who you are; and then adorn yourself accordingly.
I am from Denmark and bad know English, give true I wrote the following sentence: "Fleas are parasites that feed on the blood of any warm blooded body.Has dog flea and dog tick products that can help."

With love ;-), Murphy.


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