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China’s Energy Consumption Econ 286 Spring 2000 Josh Counts and Rhys James China’s Energy • From 1979 to 1997 China's average annual GDP growth rate came to 9.8 percent • immense size and population strains resources • distribution not production is the problem Total Energy Consumption Total Energy Production China’s Robust Growth in Energy Demand 7 6 5 4 Energy Demand (relative to 1980) 3 2 1 0 1980 1990 2000 2010 2020 Energy Intensity • Becoming increasingly energy efficient • Energy Intensity(consumption per unit of GDP) down by half over last 20 years • still 3 to 10 times that of major industrial economies • predicted to decline to 60% of current levels in next 25 years Future Growth of Total Energy Consumption • Decline in Energy Intensity leads to 4.5% average annual growth in next 25 years • triples Total Energy Consumption over that time span Current Energy Breakdown • Coal is #1 but decreasing • still not enough alternative sources to come close to ending dominance • only sizable and affordable alternatives are Oil and Natural Gas • all others including Nuclear and Hydroelectric are currently too expensive Proportion of Different Energy Types Statistics of Current Energy Breakdown • • • 1987 1995 Production (millions of 1988 1996 1989 1997 1990 1991 1992 1993 1994 tons of coal equivalent 1187.3 912.7 1290.3 958 1326.2 1016.4 1319.9 1039.2 1048.4 1072.6 1110.6 72.6 75.3 21 16.6 2 1.9 4.4 6.2 73.1 75.2 20.4 17 2 2.3 4.5 5.8 74.1 74.3 19.3 17.4 2 74.2 74.1 74.3 74 74.6 19 19.2 18.9 18.7 17.6 2 2 2 2 1.9 4.6 6 4.8 4.7 4.8 5.3 5.9 866.3 1311.8 930 1389.5 969.3 1420 987 1037.8 1091.7 1159.9 1227.4 76.2 74.6 17 18 2.1 1.8 4.7 5.5 76 73.5 17.2 18.6 2 2.2 4.9 5.7 76.2 76.1 75.7 74.7 75 16.6 17.1 17.5 18.2 17.4 2.1 2 1.9 1.9 1.9 5.1 4.8 4.9 5.2 5.7 1542.2 3266.5 1716.5 3580.1 1786.9 3895.1 1854.8 2025.4 2313 2625.3 0.54 0.39 0.54 0.36 0.53 0.51 0.47 0.44 0.42 • • Percentage of Total • coal • crude oil • Natural Gas • Hydro Power • • Consumption • • Percentage of Total • Coal • Crude Oil • Natural Gas • Hydro Power 76.2 74.6 17 17.5 2.1 1.8 4.7 6.1 • • GDP(billion of yuan, • • constant 1990 price 2956.1 Energy Consumption • (million ton per billion • yuan) 0.56 0.4 Future Breakdown of Energy • Coal will still rule • will decrease from 72.2% of production in 1998 to 67.6% in 2025 • increasing levels of Hydroelectric, oil, and Natural Gas cause slight decrease in proportion of coal Future Energy Production Energy Breakdown 1998 vs. 2025 Energy Production Growth 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Coal (in 100,000 Oil (in 10,000 tons) Generated tons) Electricity (in 100 million kwh) ***Note the units for coal and oil are different. Therefore much more coal is produced than oil. 1978 1990 1997 Coal • China is the earliest country in the world to discover, use and mine coal. • Establishment of the new China liberalized productivity of the sector to a great extent. • During the period from 1949 to 1957 when the First FiveYear Plan was finished, the annual output of coal rapidly increased to 130.5 million tons from 30.98 million tons, making China the fifth largest coal producing country in the world from the 10th in the past • As of 1995 China was the world’s largest consumer of coal, consuming one out of every 3 tons of coal worldwide Coal • It is expected that by 2000 the total output of coal in China will reach 1.45 billion tons, retaining China's first position in coal production in the world. • Mechanization will come to 80 percent of the sector, and 100 more mining pits of high yield and high efficiency will be constructed. Trends in Coal 77 76 In % 75 of total 74 Coal Production Coal Consumption 73 72 1997 1995 1993 1991 1989 70 1987 71 Projected Costs of Alternative Energy Sources in 2020 High-end Estimate 0.25 Cost per kilowatt hour in 2020 (in 1990 yuan) 0.2 0.15 0.1 Nuclear Hydro Wind 0 Coal 0.05 Cost per kilowatthour in 2020 (in 1990 yuan) Nuclear 0.3 Hydro 0.35 1.2 1 0.8 0.6 0.4 0.2 0 Wind 0.4 Coal Low-end estimate Future of Coal • Due to its relative low price compared to other energy sources and natural abundance Coal will remain the leading source of energy in China for many years to come • Hydroelectric power and nuclear power will not significantly replace coal any time soon Oil • Second-largest component of China’s Energy Consumption and Production • 1957 60% imported • 1960’s and 1970’s oil “boom” 25% annual growth and energy autonomy • began exporting oil peaking at 6.21 million tons in 1985 • by 1993 China once again a net oil importer Reasons for Decline • Obsolete technology and lack of technical expertise • severe under-investment until early eighties • First discovered fields such as Daqing(main oil field) matured Plans for New Development • Tarim Basin Fields with estimates of up to 10 billion tons of reserves • these are very optimistic • However Daqing Fields may be almost exhausted • Hurts their production as old fields are very close to industrial centers while new fields require much more transportation Trends In Petroleum 22 21 20 In % 19 of 18 Total Crude Oil Production Crude Oil Consumption 17 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 15 1987 16 Energy Imports and Exports 12000 10000 8000 Coal Imports Petroleum Imports Coal Exports Petroleum Exports 6000 4000 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 0 1987 2000 Note: Scale in millions of US dollars What Does This Mean? • Coal is plentiful in China so there is no need to import it • There is an increase in the aggregate demand for petroleum • This has caused a dramatic increase in petroleum imports • This could significantly affect world oil prices World Oil Prices China’s Effect on World Prices • The increase in aggregate demand could cause a two to three percent increase in world oil prices • China is not yet a major factor in these prices • Future dependence on Oil could change that Conclusions • Coal is and will remain the number one energy source in China in the foreseeable future • Petroleum imports will increase as consumption increases and national production stagnates causing possible effects on world oil prices