China Consumes More Energy than US: Breaks Century Old Record
Surge reflects years of rapid expansion, while U.S. has taken harder recession hit
By SPENCER SWARTZ And SHAI OSTER
China has passed the U.S. to become the world's biggest energy consumer, according to new data from the International Energy Agency.
The milestone reflects China's decade-long burst of economic growth and its rapidly expanding future needs as an industrial powerhouse. The Paris-based agency said China devoured 2,252 million tons of oil equivalent last year, or about 4% more than the U.S., which burned through 2,170 million tons of oil equivalent. The oil-equivalent metric represents all forms of energy consumed, including crude oil, nuclear power, coal, natural gas and renewables sources such as hydropower.
The figures reflect, in part, how the global recession hit the U.S. more severely than China and hurt U.S. industrial activity and energy use. Still, China's total energy consumption has clocked annual double-digit growth rates for many years, driven by the country's big industrial base. Highlighting how quickly its energy demand has increased, China's total energy consumption was just half the size of the U.S. 10 years ago.
"The fact that China overtook the U.S. as the world's largest energy consumer symbolizes the start of a new age in the history of energy," IEA chief economist Fatih Birol said in an interview.
The U.S. had been the biggest overall energy consumer since the early 1900s, he said. The IEA is an energy adviser to most of the world's biggest economies.
China's economic rise has required enormous amounts of energy–especially because much of the past decade's growth was fueled not by consumer demand, as in the U.S, but from energy-intense heavy industry and infrastructure building.
That growth has transformed global energy markets and sustained higher prices for everything from oil to uranium and other natural resources that China has been consuming. China was once a major exporter of both oil and coal. Its increasing reliance on imports has lifted energy prices world-wide and underpinned a resource boom in Africa, the Middle East and Australia.
Now, China's rapidly expanding need for energy promises to have major geopolitical implications as it hunts for ways to satisfy its needs. Already, China's rising imports have changed global geopolitics. Chinese oil and coal companies were among the first to look overseas in their quest for energy supplies, pitching the Chinese flag in places like Sudan, which Western companies had largely abandoned under international pressure.
The most ambitious effort to secure overseas energy supplies was the failed 2005 attempt by Cnooc Ltd. to take over California-based Unocal Corp. in an $18 billion bid trumped by politics and rival Chevron Corp. But Chinese companies have successfully expanded overseas, buying assets in Central Asia, Africa, South America and Canada, and even small stakes in the Gulf of Mexico. While their overall overseas footprint is small compared with big international oil companies, they are growing fast and have access to cheap credit through China's state-owned banked.
China's voracious energy demand also helps explain why the country—which gets most of its electricity from coal, the dirtiest of fossil-fuel resources--passed the U.S. in 2007 as the world's largest emitter of carbon-dioxide emissions and other greenhouse gases.
The U.S. is still by far the biggest energy consumer per capita, with the average American burning five times as much energy annually as the average Chinese citizen, said Mr. Birol, who has been in his current role for six years. The U.S. also is the biggest oil consumer by a wide margin, going through on average roughly 19 million barrels a day—with China a distant second at about 9.2 million barrels a day. But many oil analysts believe U.S. crude demand has peaked, or is unlikely to grow very much in coming years. because of improved energy efficiency and more stringent vehicle fuel-efficiency regulations
China's rise also is helping shift the focus for oil producers in the Organization of Petroleum Exporting Countries. For years, key OPEC states looked to U.S. oil consumption as justification for adding new pumping capacity. But with U.S. oil demand declining in recent years, OPEC states such as Saudi Arabia and the United Arab Emirates have built, or are building, new refineries and storage facilities in Asia to cater to China's rising energy needs. Saudi Arabia, the world's biggest crude exporter, now ships more to China than to the US.
PPrior to the recession, China had been expected to become the biggest energy consumer in about five years. But the economic malaise and energy-efficiency programs in the U.S. brought forward the date of the milestone, Mr. Birol said.
The decreased energy "intensity" of the U.S. economy is a key reason investors, such as General Electric Co., have increasingly looked to China as a driver of future growth. Mr. Birol said China requires total energy investments of some $4 trillion over the next 20 years to keep feeding its economy and to avoid power blackouts and fuel shortages.
Mr. Birol, previously an economist at OPEC, said China is expected to build over the next 15 years some 1,000 gigawatts of new power-generation capacity. That is about the total amount of electricity-generation capacity in the U.S. currently; the construction of all those gigawatts occurred over severaldecades.
China's energy intensity actually fell during the first phase of economic growth in the 1980s and 1990s, driven by light manufacturing. But that began to change in the early 1990s, when China became a net oil importer for the first time as its demand outpaced domestic supplies. China's energy demand surged again after it joined the World Trade Organization in 2001.
After 2001, energy demand growth rose to 13%, according energy analysts Daniel Rosen and Trevor Houser. Before China joined the WTO, most international prognosticators, including the International Energy Agency, predicted energy demand would increase 3% to 4% from 2000 to 2010. Instead, energy demand grew four times faster than predicted.
There is a chance China's energy intensity may slow, as it has in other developed countries. In a few years, there won't be much infrastructure left to build. Urbanization will continue but at a slower pace. And the heavy factory jobs that consume huge amounts of energy may start to shift away to other countries, partly as China's workers demand better conditions and higher salaries.But the same force that could be moving factory jobs away—rising incomes—could also underpin even greater energy needs as richer Chinese start consuming more.The question is whether China will adopt a low-energy pathway pioneered by places like Japan and Europe or follow a high-energy life-style of big houses and big cars pioneered by the U.S.
Write to Spencer Swartz at spencer.swartz@wsj.com
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