Oil Myth – China and India are significantly more inefficient than the U.S.

Posted on Apr 19 2010 at 01:44:02 PM in Countries

It's time to put an old canard to rest:  that the Chinese and Indian economies are inefficient energy users.  At least in terms of efficiency in the use of oil, India and China are significantly more efficient than the U.S. and the EU, measured in terms of dollars of GDP per barrel of oil consumption.

Whenever oil prices rise rapidly, a few familiar analysts, the usual suspects, trot out the old line about how advanced economies are so much more energy efficient than (a) developing countries and (b) compared to themselves 30 years ago (given that the 1970s oil crises spurred energy efficiency innovation).  The second statement is true, but the the first statement is false in terms of oil consumption.

Referring to the chart below, both China and India produce more than $3,000 of GDP per barrel of oil.  The U.S ranks near the bottom among the world's 20 largest economies that together represent 78% of world GDP (figures are from the CIA factbook and wiki and represent 2007-2009 figures at 2007 prices), nearly 50% less efficient than the two Asian giants.  The EU ranks about 10%-20% below India and China.  See first data column for $GDP per boe.

Another way to look at oil usage around the world is in terms of annual barrels of oil consumed per person (final column).  The chart below shows India and China consume one and two barrels of oil per person per year, respectively, whereas the average EU citizen consumes more than 10.  The average American consumes a comparatively astounding 24 boe per person.  Only Canada, at 25 boe per person, is higher among the major western countries.  Admittedly, you have to view U.S. and Canadian in light of their large geographies and relatively low population densities (as well, potentially, adjusting for colder climates).

The data reveal several interesting conclusions:

1) Given the large disparity in oil use efficiency, even adjusting for geographic, density and climate factors, the U.S. (and Canada) likely have an opportunity to achieve significant oil consumption savings by adopting tried and true conservation measures in other countries (the EU should be the base case).

2) while this data does not include all other fossil fuel energy sources, it is suggestive of the level of comparative energy use around the world, and it is clear that despite significant economic growth in India and China in recent years, these countries remain at a low level of development, and it would not be unreasonable to assign some credence to arguments from these countries that if the world wishes them to put limits on their carbon emissions, the world should compensate them (and other developing countries).

3) Under the operative assumption that the world is currently at or near Peak Oil production of about  90 million barrels per day, there is not enough future oil supply to enable the world as a whole to live a lifestyle anywhere close to U.S. and European levels.  Consider the following math:

- if the world could reduce its expectations to say achieving an EU standard of living (that's about a triple from the world's current standard of living and 60% that of the current U.S. standard of living), oil producers would have to come up with 180 million barrels per day (conservatively also assuming EU levels of oil use efficiency).  There is not a single credible forecast indicating this level could ever be achieved.

- perhaps a more concrete and near term example:  if India and China were to continue to expand at their current 10% +/- GDP growth rates for the next 10 years, oil producers would have to find 10 million barrels per day in extra oil supply (and maintain the current 90 million bpd current production).  Given that the U.S. military recently warned that it believes there is a serious risk that current production could fall by at least 5 million bpd by 2015, we actually need to come up with 15 million bpd in production over the next decade.  There are few oil industry executives who would credibly and confidently assure that the industry can meet this challenge.

These conclusions appear stark.  Relax....we will muddle through, but it is likely to prove a very difficult transition.

Bonus factoids:  The 24 barrels of oil that each American currently consumes is equal to 1024 gallons per person per year, or nearly 4,000 litres.  Based on average miles driven and average vehicle fuel economy, the average American consumes 486 gallons of gasoline per year, so it appears that the average American consumes slightly more than an additional 500 gallons per year indirectly (air travel, distribution of consumer products and feedstock in consumer products?).

Country/Reg $ of GDP per boe per capita GDP BOE PER CAPITA Poland 3,588 18,058 5.03 India 3,584 3,018 0.84 Turkey 3,482 11,778 3.38 UK 3,364 34,919 10.38 China 3,178 6,575 2.07 Germany 3,137 34,293 10.93 France 2,969 32,508 10.95 Italy 2,827 29,267 10.35 EU 2,764 28,982 10.48 Brazil 2,338 10,487 4.49 Spain 2,326 29,739 12.78 Australia 2,322 37,227 16.03 Japan 2,266 32,606 14.39 World 2,261 10,301 4.56 Indonesia 2,177 4,193 1.93 Taiwan 2,042 30,800 15.08 Russia 2,029 14,908 7.35 Mexico 1,917 13,731 7.16 US 1,889 46,149 24.43 South Korea 1,662 26,860 16.16 Canada 1,487 37,853 25.45 Iran 1,429 11,838 8.28

  Article Information
Author: StickyFeet
Created: Apr 19 2010 at 01:44:02 PM
Updated: Apr 19 2010 at 01:44:02 PM
Category: Countries
Language: English