China and India Clamor for Oil

Lately I have been thinking about buying a new vehicle. With gas prices likely to stay high, I want to buy a fuel efficient set of wheels. It only makes sense to try and keep energy costs as low as possible. Because I have been working from home for almost the last three years, I have been driving much less. Is oil conservation in the U.S. going to help keep the price of oil from rising? I don’t think it will matter because China and India will continue to increase their use of gasoline.

Every day more than 20,000 new vehicles are added to Chinese roadways. There are less than 2 cars for every 1,000 citizens. Compare that to the United States which has about 470 cars per 1,000 citizens. Also consider that the United States consumes about 15 times as much oil per day as in China. Factor in the economic growth rate of China at about 10% per year and it is easy to see rising oil demand in the years ahead. Remember that the population of China and India is about seven times that of the U.S.

If you are thinking that most of the new car buyers in China are purchasing smaller fuel efficient cars, you are mistaken. The fastest growing segment is the big luxury gas guzzlers. As the economy of these two giants grows, more and more affluence is being created. Those already in the cities owning businesses are finding millions of new consumers. This is the result of peasants moving to the cities to find work. The rate has been averaging over 30 million per year. In the next 20 years, there could easily be 400 to 500 cities supporting populations of over a million people.

All this with India right behind. As the new technology mecca of the world, the Indian economy is growing at about 7% a year. Still, about 70% of the population has yet to enter the 21st century. India is in the midst of overhauling its infrastructure. Again, similar to China, millions of workers are flocking to the cities to find work. This will create another massive number of new consumers. First China, then India right on her heals. Not to mention other parts of the world like South America and Europe, each with steady or growing energy demands. Throw in a civilized Africa somewhere down the road, and the dogfight for oil will reach mind-boggling proportions.

There will be rising demand for every barrel of oil produced. Taking it a step further, most of that oil will have to be refined into gasoline and other usable products. Unfortunately, refineries can’t be built fast enough to meet the rising demand. Capacity today is barely keeping up with the clamor for energy. This will keep steady pressure on the price of oil. While it is possible that a recession or economic slowdown in parts of the world might temper demand, China and India themselves will see little slowdown. They are in effect creating their own need for resources by the very factor of their internal growth.

Imagine if, in the United States, there were 1.5 billion people with the potential to become regular consumers. Cars, homes, furnishings, appliances, electronics, and just about everything else would be in the dreams of those new consumers. Don’t forget the roads, buildings, and other infrastructure that would have to be built along the way. As you can see, the future demand for energy is going to only escalate. We have never experienced such worldwide growth. Energy related companies will continue to reap the rewards. However, it will be increasingly costly to find and produce every new barrel of oil. The consumer will end up bearing the cost. In effect, we in the U.S. will be paying higher prices so that 100’s of millions of people around the world can begin to enjoy the life styles that we have for so long.

Can the United States conserve enough energy to make a difference? Will we want to change our life styles? Whatever conservation efforts we do manage to accomplish, it will a drop in the bucket. We do not control our future energy costs. Prices will rise because oil is a worldwide commodity. The cold hard choices may come down to driving smaller vehicles and using them less. For those with enough money, they might continue to consume as they have in the past.

I know for myself, every few years I get the urge to go on a motor tour to some part of the country. The trade-off for me is that I no longer drive every day to a place of work. So, theoretically, I can still take a driving vacation and use much less gasoline per year than I have in the past. The energy crises of years past have come and gone. The energy crunch that we find ourselves in today is likely a more permanent event. Considering the current trends and the vast numbers of people involved, we will have less influence on the rising price of energy.