China powers up as world’s largest energy consumer

Even as millions of gallons of oil flow into the East China Sea, off the coast of Dalian from last Friday’s pipe burst,  China has superceded the United States to become the world’ largest consumer of energy. According to the International Energy Association, China consumed 2,252 million metric tons of oil equivalent in 2009 in the form of crude, coal, natural gas, nuclear power and renewable outweighing the 2,170 million tons used by the U.S by four percent.

China is already by far the world’s largest user of coal. Despite its own vast resources, its imports of thermal coal are expected to hit 105-115million tonnes this year, pushing it ahead of Japan as the world’s largest coal importer. Only three years ago China was a net coal exporter. The trend has also been apparent in oil. Saudi Arabia, the world’s most important oil exporter, for the first time last year sold more oil to China than the US, which for decades had been its most important customer.

While China’s voracious appetite for energy has grown manifold over the last two decades through strategic diplomatic and economic ties, the shift to the world’s largest energy consumer is significant even as the global financial Axis oscillates East.

“It’s one of those major turning points,” Tilak Doshi, the chief economist at the Energy Studies Institute at the National University of Singapore, told Businesweek in a phone interview. “China is growing by leaps and bounds. You’ve got OECD countries where you’re talking about oil demand peaking, meanwhile the emerging countries like China and India will keep growing their energy demand.”

The move East gains further significance both on cost and responsibility perspectives too. Due to the large volumes it imports, China has for sometime now being dictating global prices of coal, crude oil and natural gas. Last week, Inchin Closer reported how coal prices in the Australian port of Newcastle, the benchmark in Asia, have risen again to US$100 a tonne on the back of buying by China, India and other countries. In Europe, coal prices in Rotterdam for delivery in three months – the benchmark – rose last week to US$96 a tonne, the highest since November 2008.

The biggest consequence however remains that with this huge appetite comes global responsibility. As China becomes the world’s highest consumer of energy, the country will increasingly determine how energy is used on a global scale – from the types of cars manufactured to the kinds of power plants built. This means China will also determine energy consumption patterns outside its boarders. “There will be a big multiplier effect,” Mr Fatih Birol, the IEA’s chief economist, told the Financial Times.


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