Despite aggressive demand-management policies announced in recent years, China’s oil use could easily reach levels
comparable to today’s U.S.
levels by 2040, according to a new energy study by the Baker Institute.
The study’s authors say this finding has timely significance because China’s growing energy use could continue to
pose a major challenge for global climate deliberations in South Africa this week (the week of
Nov. 28, 2011).
The study, “The Rise of China and Its Energy Implications,” finds
that China’s recent efforts
at centralizing energy policy do not appear to be significantly more successful
than the makeshift patchwork of energy initiatives devised by the United States.
In fact, the study says, the U.S.
system of open and competitive private sector investment is stimulating more
innovation in the American energy sector than in the Chinese energy industry,
especially in the area of unconventional oil and gas.
That, ironically, is attracting Chinese state investment to U.S. shores and prompting Beijing
to consider further opening of its oil and gas exploration activities to
partnerships with U.S.
firms, the study says.
China, like the United States,
has substantial potential shale gas resources but faces technical, regulatory,
and market infrastructure challenges that are likely to delay rapid
development. Were China to
mobilize investments in shale gas more quickly, the study says, it could
greatly reduce the country’s expected large import needs for liquefied natural
gas (LNG) from Australia and
the Middle East and contribute to a future
glut in global natural gas markets.
Despite sporadic government policies to discourage private car ownership,
the growth in the number of vehicles on the road in China has more than quadrupled in
recent years to more than 50 million. The Baker Institute report projects that
this number could increase to more than 200 million vehicles by 2020 and 770
million by 2040 under a scenario where China’s real gross domestic product
growth averages 6% between now and 2030. Even under a scenario where the number
of electric cars rises to 5 million a year by 2030, which is in line with
ambitious targets announced by China’s
National Development and Reform Commission, China’s oil use from the
transportation sector will grow significantly, the Baker Institute study says.
“Given the scale of vehicle stock growth in China, it is going to be extremely
difficult to move the needle of the country’s rising transport fuel
outlook,” says Kenneth Medlock, a study author and the James A. Baker III
and Susan G. Baker Fellow in Energy and Resource Economics at the Baker
Institute.
The study noted that China’s
“going abroad” strategy has also encountered recent difficulties in
light of geopolitical events and rising global political risks in oil-producing
regions.
“China
is learning that owning equity oil in risky regions may not be as effective an
energy security strategy as it had previously imagined,” says Amy Myers
Jaffe, an author of the study and the Wallace S. Wilson Fellow for Energy
Studies at the Baker Institute. “China is now finding itself mired
in more energy-related foreign diplomacy than it bargained for.”
“But this could be good news for the United States,” Jaffe says. “It may
mean China
will be more inclined to act in concert with other members of the international
community in conflict-prone regions.”
The study noted that China
has tried to offset some of this risk by increasing investments in the United States and Canada,
which gives the U.S. more
leverage in seeking China’s
collaboration in international diplomatic matters.
