Will China Cap It's Oil Demand?

There was an interesting story from PennEnergy yesterday called Economist warns of slowdown in Chinese oil-demand growth—

By OGJ editors
HOUSTON, Aug. 18 -- Ever-increasing Chinese oil-demand growth, a staple of market forecasts, can’t last forever, warns a veteran energy economist.

“Everyone counts on China’s demand growth, and all depend on it,” says Fereidun Fesharaki, founder and chairman of FACTS Global Energy and a past president of the International Association for Energy Economics.

But he adds: “The idea of runaway demand forever is simply not realistic.”

If Chinese demand growth stops, “much of the expectations and plans made by energy experts and the oil industry will need to be reexamined and conclusions changed,” Fesharaki says in an August report.

The Chinese government wants to stabilize the country’s oil demand growth despite rapid economic expansion by 2020.

“The initial plans are to create a peak demand at 2020 at 12-12.5 million b/d and allow only marginal growth thereafter,” Fesharaki says...

Fesharaki says limitation of Chinese oil demand to about 13 million b/d in 2020, followed by growth of 100,000-150,000 b/d/year, might be achievable.

“Based on these [rates], we strongly advise reassessing and revising down China demand forecasts for beyond 2020,” Fesharaki says.

I don't know whether Fesharaki just made this up, or if he has sources inside China tipping him off about their longer term energy plans. In either case, it gives me an excuse to discuss China's future oil demand, which I initially addressed in China's Oil Grab.

Fesharaki believes there will a geopolitical "policy" peak in oil production of about 95 million barrels-per-day (all liquids) sometime between 2015 and 2020 according to a presentation (powerpoint) I found on his website. So that's why "the idea of runaway demand forever is simply not realistic." Here Fereidun and I part ways because I believe, based on the evidence and it's reasonable interpretation, that both geological & geopolitical factors will cause a peak in world oil production at a much lower level ("Never 90") sometime before 2015. 

In either case, there is a soft cap on China's demand, which their government has supposedly set at 12-12.5 million barrels-per-day in 2020. Thereafter, China's oil demand would grow at a modest 100,000 barrels-per-day. Is such a plan realistic?

China may very well end up consuming 12.5 million barrels-per-day in 2020, but that would also mean that other countries will be using at least 2.5 million barrels less each day. What countries are going to be sacrificed on the Peak Oil Altar? Certainly these will include the poorer nations with low consumption rates, who will not be able to pay the asking price for oil. Who else will be forced to cut their consumption? The Americans? The Europeans? Lowered consumption certainly won't occur in the big oil producing countries, whose subsidized internal demand has grown steadily for many years now (e.g. Russia, Venezuela, the Persian Gulf states).

If the Chinese government really is planning on capping their demand by 2020, that would seem to indicate that China is preparing for a liquid fuels peak which they expect to arrive some years later than I do. For the OCED (developed) countries, and America in particular, the standard story now is that we've already reached "peak demand" because—mirabile dictu—we have (or are about to) become marvels of liquid fuels efficiency.

According to this bullshit narrative, America's economy could grow & grow & grow without us ever using more than the 19-20 million daily barrels we consume now. Should we believe this story? Well, let's see—can pigs fly? On the other hand, we may very well have reached peak demand because our economy is about to shrink & shrink & shrink

I have to put this "oil demand cap" story in the rumor bin for now, but the idea makes sense. As the PennEnergy article points out, the Chinese are ramping up efficiency across the board and trying to slow rampant consumption growth—

Although the 2020 demand target might not be achievable, Fesharaki says, “there will be a major effort on their side to slow down the demand growth” with measures that might include oil taxes, consumption restrictions, rationing, and mandates for use of alternative energy and energy-efficient equipment.

In July, the Ministry of Industry and Information Technology ordered 2,087 companies in the cement, steel, and other industries to close production facilities deemed to be using energy inefficiently, according to the official Xinhua news agency. The country is approaching the end of a 5-year effort to cut energy consumption per unit of economic growth by 20%.

And what are we doing in the United States to prepare for peak oil? Diddly-squat! But let's travel back in time to February 2, 1977...

The fun starts at about the 2:15 mark

Comments

[Edward Boyle]

I recall an article a couple weeks back where the Chinese claimed wanting to stop using more coal by 2015, similar to the concept with oil above. I also read some story where the reporter was calling around at some of these 2087 factories and it was a joke, they were shut down already, so the government claim to be shutting plants down to get tough on emissions was just propaganda. I think both oil and coal stories mean China is admitting to/preparing for Peak coal/oil.