There Goes Chinese Energy Demand

The International Energy Agency cut its oil demand estimates for every year through 2013 by about 3 million barrels a day, it said in its Medium- Term Oil Market Report today. Consumption will average 86.76 million barrels a day in 2012, the first year it will rise above 2008’s level of 85.76 million barrels a day, according to the Paris-based agency.

Well so much for demand for Energy from China. This demand growth has always been hyped by Energy bulls, but as I and many others have stated previously, what really matters is demand growth from the the U.S. and other industrialized nations.

Here is how the math works:

Oil demand in 2009 for the OECD countries is 45.2 million barrels per day, down 2.3 million barrels per day from 2008.

China oil demand is 7.9 million barrels per day. Let's assume that it grows at 5% a year, or about 400,000 barrels per day.

As you can see, the fall in demand from the OECD easily wipes out demand growth from China by a factor of at least five.

Comments

[Larry House:]

Thanks for the useful info. It is sometimes hard to get through the hype to the facts.

Jun 29 02:28 PM

[DONE_SONZ:]

Didn't China just mention they are going to up their reserves by 150%?EIA will have to change their mind once again.

Jun 29 05:13 PM

[Vuke:]

The EIA forecasts are noted to be fairly reliable, but not infallible. The Chinese economy seems to be picking up well, auto sales are booming so demand may exceed expectation. Throw in growing African, Indian, South American, Indonesian and OPEC country internal demand plus a growing reluctance to sell cheaply and forecasts could rapidly change.

And, of course, it's always open season in Nigeria and Iraq, and we're in hurricane season now so it may be wise to ignore official forecasts and stay long oil.

Jun 29 07:23 PM

[HaavBline:]

I don;t mean to be picky, but the title of this article misleads.

China's energy demand growth IS 'there'. The author really meant: 'There goes OECD Energy Demand'

Jun 30 12:40 AM

[A Barrel Full:]

China is always overhyped, difficult to know why as the reality is always interesting enough.

However, add in the rest of the developing world, and the numbers are a little closer to what the energy bulls are saying.

Jun 30 05:32 AM

[Eric Fox:]

The IEA also said that oil demand won't exceed the 2008 level until 2012. This assumes a more robust economic growth scenario. If they use a slower growth scenario, then oil demand in 2014 will actually be LESS THAN it was in 2008. (yes, I put that in bold on purpose)

Jun 30 09:12 AM

[Ferdinand E...:]

Why do you quote the IEA? Why don't you quote me, the leading academic energy economist in the world? Well, unfortunately, if you did quote me I wouldn't be able to help you, even if some money changed hands, but I could give you a little information about the IEA.

They are mostly wrong. In fact some of their so-called experts must be dumber than stupid to produce some of the forecasts they circulate around the world. When I was teaching in Bangkok I enjoyed myself greatly ridiculing their forecasts, but when I returned to Sweden I was put in my place by their director general who informed me that IEA forecasts deal with consumption and not production.

By putting me in my place I mean that anyone so nutty as to make a claim like that . consumption but not production - could not be reasoned with, because it has nothing to do with conventional economic logic, and so I broke off all communication with him.

Jun 30 11:07 AM

[Fred Linn:]

News coverage from China is not very plentiful, and probably not too reliable.

However, some of the news that I have seen includes an announcement by Abengoa, the Spanish energy company that they had won contracts to build 6 of the largest cellulosic ethanol plants in the world in China(this has been awhile back so I imagine that those plants must be nearing or are completed by now---bamboo was to be the feedstock). As of 2006, another article said China was emerging as a major ethanol exporter.

Under automotive news---I saw articles that said China had gone into production of cars that used hydrous ethanol(straight from the still---no blending). Pretty sporty looking cars too. Production last year was set at 1.8 million units----and was expected to be increased to 2.6 million this year. That's over 4 million vehicles in two years.

Depending on how reliable the reports are, it would appear that China is moving at flank speed toward converting from petroleum to ethanol. Supplies must be plentiful, otherwise, why would they be exporting and building ethanol only fueled vehicles?

Perhaps this is a reason for declining petroleum demand in China.

Jun 30 11:53 AM

[Fred Linn:]

------"........I mean that anyone so nutty as to make a claim like that . consumption but not production - could not be reasoned with,......."---------

There is no production when it comes to fossil fuels. There is only a finite amount, and that is being used up, consumed.

When it comes to petroleum, the phrase "increasing production" means increasing the rate of consumption.

Jul 01 02:51 AM