2010 October 31 Sunday
China Oil Demand Continues To Grow
Another 6 hundred thousand barrels a day of oil used in China means less for the Western countries.
Purchases increased 11 percent to 23.29 million metric tons, or 5.52 million barrels a day, compared with a month earlier, according to preliminary data released today by the Beijing- based General Administration of Customs. That beat a previous record of 22.27 million tons in June.
Since world oil production is still well below 2005 production levels (and 2005 remains the oil peak period at the yearly level of granularity) China's growing oil demand means less oil consumption by the OECD countries. China will bid up the price of oil and Western economies will reel in response. China now makes more cars per year than the United States. So China's small existing car fleet is going to double and double and double again.
My advice: make your next car a hybrid or a small car. The approaching world decline in oil production is going to make gasoline very pricey.
Also, choose jobs and housing to minimize your energy demand, especially your demand for petroleum distillates.
Randall, you write a lot about gas prices but I don't recall anything about getting gasoline from coal. China and the US have a lot of coal. What is your take on the following project? I don't see any mention of how much this is expected to cost per gallon of gas.
Coal to gas works (as I recall SASOL was profitable above $25/barrel oil prices, but I don't know how much of their capital was effectively paid for by the SA govt). But as I recall it takes a lot of fresh water. There are environmental issues.
I find it interesting that EIA puts peak in 2006. Other sources put it in 2005. Here is world total daily average production by year 1995-2009. That view shows what a discontinuity started in 2005. We've been bouncing up against a ceiling for 6 years running now. The increases of 1-2-3 million barrels per year are a thing of the past.
It is not coincidental that the economy has been stuttering since that ceiling was reached. Hard to grow without using more energy.
I've read some technically knowledgeable (Chem Es and such) commentators saying Coal-To-Liquids are never going to become a big source. The biggest reason is capital costs and operating costs for CTL plants. Another reason is coal supplies. One of Kjell Aleklett's grad students just did a Ph.D. thesis arguing global Peak Coal falls between 2030 and 2060. That's way sooner than the coal supply optimists have long argued. If the earlier peak is correct then no way is coal doing to do much to ease our transition from oil.
One problem is that as oil and other energy prices rise so do the costs of capital. So the cost of a CTL plant today has a break-even well above $25 per barrel.
The 'oil production ceiling' appears to have no effect on China's 10% per annum year-on-year economic growth rate.
Not yet. But anyway, if you look at consumption-as-%-of-GDP for China (low and continuing to set new record lows), you can see that their economy has massive bubbles. There's a lot of stuff (new but empty malls, airports, heck whole towns) that I'm quite sure has yet to be written down as a loss. Not to say that the automotive sector won't continue to boom, though!
This is why the US of A should take advantage of our ample natural gas resoruces to transfer our transportation fleet to nat gas and nat gas-electric hybrids. this can bridge the way to a future electric fleet that the enviros keep promising us is just 5 years away.
Something like 70% of China's energy comes from coal. They aren't as sensitive to oil prices as we are. That will change and their growth will slow. Their rate of vehicle manufacturing assures that. But right now they can grow in spite of high oil prices.
Yes, China's economy is distorted. Their rate of return on capital is declining. So their growth rate will probably slow. But even if it slows their oil consumption will continue to rise.
It'll take a pretty high price for gasoline to spur large scale adoption of natural gas vehicles. Hybrids will take off in popularity before NGVs because hybrids fit in better with current usage patterns. NGVs have lower range and lower power as well as being less convenient and slower to fill up. The natural gas tank costs more room than the hybrid battery too.
See http://www.theoildrum.com/node/7078 for Alan Drake's proposal to squeeze petroleum out of the US freight transport system.
The problem with these peak oil estimates is they don't take account of how often the world goes into recession, which is ironic considering many peak oil advocates are critics of the capitalist system. However, I do think that it can't be far off, since oil companies aren't investing all that much in exploration. If there was lots of oil still to found their would be huge amounts of money going into exploration.