Baker Institute: Chinese oil demand to equal US demand by 2040

China’s demand for crude oil easily could reach levels comparable with today’s demand levels for oil in the US by 2040, according to a new energy study by Rice University’s Baker Institute. The study was release Dec. 1, one day before a conference at Rice on Chinese and energy.

The study, “The Rise of China and Its Energy Implications,” also said China’s recent efforts at centralizing energy policy do not appear significantly more successful than what researchers call “the makeshift patchwork of US energy initiatives.”

Researchers said the US competitive private sector investment is stimulating more innovation in the US energy sector than in the Chinese energy industry, especially in unconventional oil and gas. That is attracting Chinese and other international oil companies to acquire US unconventional assets, largely through joint ventures with US independents.

“China has substantial potential shale gas resources but faces technical, regulatory, and market infrastructure challenges that are likely to delay rapid development,” the study said. “Were China to mobilize investments in shale gas more quickly, researchers believe China could greatly reduce the country’s expected large import needs for LNG from Australia and the Middle East.

Chinese buying more cars

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.

The Baker Institute estimate is based on a scenario in which China’s real gross domestic product growth averages 6%/year during 2011-30. Even under a scenario where the number of electric cars rises to 5 million/year by 2030, which is in line with targets announced by China’s National Development and Reform Commission.

China’s oil use from the transportation sector will grow significantly, researchers said.

“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,” said Kenneth Medlock, a study author and Baker Institute fellow.

Another study author noted China’s “going abroad” strategy has encountered some difficulties given 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,” said Amy Myers Jaffe, a study author and Baker Institute fellow.

“China is now finding itself mired in more energy-related foreign diplomacy than it bargained for,” Jaffe said, adding, “But this could be good news for the United States. It may mean China will be more inclined to act in concert with other members of the international community in conflict-prone regions.”

Contact Paula Dittrick at paulad@ogjonline.com.

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