[C8]

It finally struck me today that China is truly serious about achieving a US level of lifestyle for all its people. It wants them to be consuming massively more energy than they are currently doing. This will involve upgraded housing, massive transportation networks, over a billion cars, extreme electronics acquisition, and perhaps most important of all- a vastly higher energy diet of heavy meat consumption which will require yearly draws of extreme levels of energy.

I don't think this is really a communist or capitalist thing so much as it is a giant collective shared feeling among the Chinese that they really should all be living at standards that equal those of Japan, S. Korea and the West. The EU has about 500 million people. The US has about 320 Million, Japan about 127 million and S. Korea at @ 50 million. Russia is about 143 million. China has more than all this combined at 1.34 billion.

The thing is, up until now I didn't think they could pull this lifestyle upgrade thing off for more than a small subgroup in China (less than 1/3) but now I am not so sure. I now believe they will actually do it- and double the energy, environmental draw on the world in the process. It is like earth is going to copy itself in another 25 years (about how long it will take them to bring everyone on board).

They have an incredible nationalistic sense that this is their century, its like everybody works and sacrifices for "team China". We are witnessing one of the greatest transformations in history. All the discussion about climate talks, conservation, energy transition, peak oil will be overwhelmed by this huge surge of a people suddenly caught in the fever of "more"! It doesn't matter how much agriculture is expanded if more land is turned over to higher energy foods for meat production. It doesn't matter if more oil is discovered if it just gets absorbed by growing sales of SUV's in China. This single march is transforming the world and undoing all responses to mitigate the problems we face. Geopolitics trumps science.

[ROCKMAN]

C8 – Nice synopsis…thanks. I’m not much of a history buff but is what you’re describing much different than what the US first experienced around the beginning of the industrial age? I can imagine Americans at that time looking at the lifestyle of Europeans in the same light. And then post-WWII that sense must have been greatly magnified at least in part by the fact that the US was THE Saudi Arabia at that time with respect to oil. Granted they may have been focusing on the small elite class in Europe just as they may have been looking at our powerbrokers like the Rockefellers. And now, with the web, it’ so much easier for the Chinese people to see what “they” have vs. what the bulk of the Chinese population doesn’t have. Many Chinese migrated to the west to share that lifestyle. Now it looks like they will try to export it to China.

It seems the bigger question isn’t where the Chinese are trying to go but will they follow some of the misstep the rest of the world made by being so dependent upon fossil fuels. In the short term they need that edge to grow IMHO. But longer term will they begin making adjustments to a more sustainable economy? Time will tell.

And yes...very nationalistic down to poor street vendors. When I was adopting my daughter over there I would hang around the street instead of the hotel. I would eventually find someone who spoke enough English. I surprised how often they would rather talk about how things were changing in China instead of asking me about the US. They may have been individually poor but seemed to have a very proud sense of how well they were nationally. A lot more pride then I think most Americans would expect.

[C8]

Rock- Chinese folks know their history pretty well, history has always been a popular subject in China. They know about the great emperors, how China was ahead of the world, the accomplishments. They also know about the imperial takeover by the west. There has always been a sense of envy over Japan's accomplishments since WW2. Many don't understand that the ancient outlook of the people (the Han) as being one family has never really died. Something the Chinese have going for them maybe some other empires lacked at the beginning is that they have a strong diaspora around the world that creates ready business connections and an inroad to other economies. Chinese people can be found all over the world and in the most isolated places in other nations (there are hollers in West Virginia that have almost no immigrant groups- but do have Chinese running restaurants and various little businesses.)

One thing I noticed in the US is that the Chinese don't associate as much with non-Asians as other immigrant/ethnic groups do. They keep to their family. I live in a neighborhood with people from Israel, India, Russia, France and South America as well as Chinese. The Chinese are the only ones who don't really interact much with other neighbors (kids playing, block parties, etc.) There is a real sense of a Chinese family worldwide that takes priority- Chinese culture is very strong and they do not give it up as much as other groups do when they acclimate to a new nation. As a nation, they sealed themselves off from the west for a long time also. This entrance into the world is a cyclical thing in China- but they never really blend with the world.

[Shaved Monkey]

Simple answer is too many people not enough resources.

[SeaGypsy]

Parity is the goal, but it's not China-USA 2013, but China-USA 2040/50.

Chinese work mostly 6 times 12 hour days with a week or 2 off a year.
Chinese mostly live in small apartments. Senior management are paid similar wages to western janitors. They buy ridiculously expensive larger apartments. The Chinese don't tend to create massive turnover businesses with no end product.

I have been making this argument, China becoming the benchmark for world wage earning parity, for several years. This means the old meme of the world rising to meet the USA/ first world is wrong, always was wrong. China will continue for some time to raise living standards whilst the USA and rest of the first world drops. Equilibrium or parity imply some stability occurring around this point, which is probably less than likely.

A more accurate header would be 'what if China achieves Singapore's standard of living'? More likely, more realistic.

Also reading this push for parity as belonging to China is totally wrong. The push for parity belongs to global venture capitalists first, then their wanna-be tagalongs (small and medium business owners who eye with envy every article they come across describing $10 a day workers).

China is along for the same ride, just starting at a different point.

[westexas]

The 10 year decline in the GNE/CNI ratio (see definitions below)

2002: 11.9
2003: 11.1
2004: 9.7
2005: 9.5
2006: 8.3
2007: 7.7
2008: 7.8
2009: 6.1
2010: 5.8
2011: 5.2
2012: 5.0

At the 2005 to 2012 rate of decline in the ratio, 9.2%/year, the ratio would approach 1.0 in about 18 years, when China & India would theoretically consume 100% of Global Net Exports of oil (GNE).

GNE = Top 33 net oil exporters in 2005, approximately 99% of total net exports in 2005
CNI = Chindia (China + India's) Net Imports
Production = Total petroleum liquids + other liquids (EIA)
Consumption = Liquids consumption (EIA)

Link to my essay on the Export Capacity Index (ratio of production to consumption):
http://peak-oil.org/2013/02/commentary- ... ity-index/

[dinopello]

Yep, China wants our bacon - literally

Should we let then buy our agribusinesses ? They are up and down the western hemisphere and Africa buying up this stuff.

[SeaGypsy]

Not just western, New Zealand and Australia.

[C8]

Parity is the goal, but it's not China-USA 2013, but China-USA 2040/50.

A more accurate header would be 'what if China achieves Singapore's standard of living'? More likely, more realistic.

Don't you believe China will unleash massive amounts of energy for its economy and higher living standards? They are building over 100 nuke reactors and buying up the world's oil- that doesn't sound like Singapore to me. China isn't just making things- its making energy! (although I do agree with you that US standards will decline so we will meet more in the middle rather than them raising all the way up to us)

Also reading this push for parity as belonging to China is totally wrong. The push for parity belongs to global venture capitalists first, then their wanna-be tagalongs (small and medium business owners who eye with envy every article they come across describing $10 a day workers).

China is along for the same ride, just starting at a different point.

You don't think the average person in China, much exposed to the media and how people live around the world, wants better things? Seems like more than just venture capitalists at work.

[C8]

The 10 year decline in the GNE/CNI ratio (see definitions below)

2002: 11.9
2003: 11.1
2004: 9.7
2005: 9.5
2006: 8.3
2007: 7.7
2008: 7.8
2009: 6.1
2010: 5.8
2011: 5.2
2012: 5.0

At the 2005 to 2012 rate of decline in the ratio, 9.2%/year, the ratio would approach 1.0 in about 18 years, when China & India would theoretically consume 100% of Global Net Exports of oil (GNE).

GNE = Top 33 net oil exporters in 2005, approximately 99% of total net exports in 2005
CNI = Chindia (China + India's) Net Imports
Production = Total petroleum liquids + other liquids (EIA)
Consumption = Liquids consumption (EIA)

Link to my essay on the Export Capacity Index (ratio of production to consumption):
http://peak-oil.org/2013/02/commentary- ... ity-index/

WT- I appreciate your numbers and analysis, I do think there is reason to believe China will avoid the fate that your data implies:

1. China is rapidly securing joint ventures with other nations to maintain oil flow- as Rockman has detailed. I believe this will slow down the ELM effects on China.

2. ELM is going to have to start breaking down eventually anyway. If nations allow their oil exports to decline by too much they won't have revenue to buy from the world market things like food, etc. The problem with ELM is that different nations will decline oil exports at different rates. Egypt is a prime example, they used to export oil and now import (I think), but their decline in oil export volume was not made up for by high enough prices per barrel as SA and others were still flooding the market. The only thing that saved Egypt is that they have a very diverse economy and get massive, massive US aid- otherwise they would have had to cut gas subsidies to citizens much sooner. SA is going to have to cut subsidies too. ELM will go only so far and then stop or reverse course. The past is not the future.

3. China is acquiring many other powerful energy sources and will not rely only on oil anyway- they are the leaders in power acquisition in nuclear, renewables, coal imports (soon) and will aggressively be involved in methane ice I believe.

China is not a cheap one trick pony, they are becoming very educated and developing scientific prowess at warp speed. I think it is a huge mistake to lump them in with India, Pakistan, Vietnam, etc.

On a side note; I have followed your work but many laymen may be put off by your numbers- a simple one sentence conclusion of the data may make more people look at the numbers since they understand their significance- we don't all have the math gene

[westexas]

Of course the principal impact of the ongoing decline in the GNE/CNI ratio is on developed net oil importing countries like the US, which, so far at least, are gradually being shut out of the global market for exported oil, as Available Net Exports, or GNE less CNI, fell from 41 mbpd in 2005 to 34 mbpd in 2012.

Regarding "Net Export Math," given an ongoing production decline in an oil exporting country, it is a mathematical certainty that unless domestic consumption in that oil exporting country falls at the same rate as the rate of decline in production, or at a faster rate, the resulting net export decline rate will exceed the production decline rate and the net export decline rate will accelerate with time.

Even Denmark, which heavily taxes oil consumption, has shown an accelerating rate of decline in net exports.

Denmark’s 2004 to 2012 rate of change numbers (EIA):

(P = Production, C = Consumption, NE = Net Exports.)

P: -8.0%/year

C: -1.9%/year

NE: -18.7%/year

ECI Ratio (P/C): -6.0%/year

In Denmark’s case, their 2004 to 2005 net export decline rate was 4.5%/year, while their 2004 to 2012 net export decline rate accelerated to 18.7%/year.

In simple percentage terms, a 47% decline in production from 2004 to 2012 resulted in a 78% decline in net exports, even as consumption fell by 14%.

[ROCKMAN]

westexas - Interesting that you offer Denmark. A short while ago a cohort posted a request here about the future of shale exploitation in Denmark. Apparently they understand the trend also and the govt is looking for potential solutions down the road. I have to believe other exporters, in particular the Saudis, are also looking for ways to mitigate the ELM path they are on. Which is why the KSA cutting the refinery deals with China makes sense: by increasing the value of oil production by exporting products they can maintain a cash flow at lower oil production rates. I think they've learned the lesson well that there is a limit to how high oil prices can go before demand destruction reduces their income regardless of what price they set for their oil. But from the little I've seen they are not addressing their baby boom. Selling products vs. oil may buy them some time but as long as their population grows and they try to maintain living standards they'll still run into that ELM brick wall eventually. I see reports they are trying to develop other aspects of their economy but oil exports are such a dominant component while they also have few other physical resources it seems that effort could fall very short of their goal.

[C8]

. I think they've learned the lesson well that there is a limit to how high oil prices can go before demand destruction reduces their income regardless of what price they set for their oil.

Exactly my point. ELM is a historical model, not a predictive one. Differing nations will decline at differing times in history and those that decline when prices aren't high enough to make up for volume losses will have to take action to stop ELM or go bankrupt. The people will either get subsidized oil or imported food but not both- I have no doubt what the choice will be.

[ROCKMAN]

C8 - "ELM is a historical model, not a predictive one." Of course it's a predictive model...until it ain't. LOL. It seems from the westexas data it’s been very predictive for a number of years now. But, as you imply, there are limit that will have to come into play that prevent the projections to be correct X years down the road. Just as the projection that China and India will be buying every bbl of oil exported on the planet some years down the road. The BIG question in both cases is how long before the trajectory changes, how fast it changes and how will all the POD dynamics respond to that change. I wouldn’t even try to offer some expectation. As you say: if an exporter sells all their oil to feed/support their people they won’t be able to provide the energy needed to run their economy. But if they don’t sell enough oil to feed/support the population how will their population react? For some time now I’ve felt that oil depletion could eventual pose a much greater danger for some exporters, especially the KSA, than it might for some importers.

[SeaGypsy]

Parity is the goal, but it's not China-USA 2013, but China-USA 2040/50.

A more accurate header would be 'what if China achieves Singapore's standard of living'? More likely, more realistic.

Don't you believe China will unleash massive amounts of energy for its economy and higher living standards? They are building over 100 nuke reactors and buying up the world's oil- that doesn't sound like Singapore to me. China isn't just making things- its making energy! (although I do agree with you that US standards will decline so we will meet more in the middle rather than them raising all the way up to us)

Also reading this push for parity as belonging to China is totally wrong. The push for parity belongs to global venture capitalists first, then their wanna-be tagalongs (small and medium business owners who eye with envy every article they come across describing $10 a day workers).

China is along for the same ride, just starting at a different point.

You don't think the average person in China, much exposed to the media and how people live around the world, wants better things? Seems like more than just venture capitalists at work.

The most important thing China can do about now is build it's internal consumption, preferably whilst minimizing expensive imports. They are short on oil, and potentially short on food. So shoring up both makes sense regardless of some arbitrary goal such as matching US levels of consumption. My use of Singapore as a more realistic goal is not about Singapore's geopolitical position, but of it's standard of living. Their focus on mass transit and high density urban development seems to display a more Singapore, less USA orientation.

Singaporeans mostly work the Asian standard 12/6- 72 hour week, live in small apartments, earn about half what similar jobs earn in the USA, Australia or Europe (for close to half the hours- so about 25% on an hourly basis)- they are not poor by Asian standards, nor by western standards, but they manage a first world standard of living on much less individual consumption than is common to the west.

There are many aspects to consider when looking for parity. Some can be measured in simple consumption equations, others are ingrained cultural positions and lifestyle factors. If 'US Level Living' implies much shorter working hours, wages multiplying by a real factor of about 10, driving holidays and a dominant service sector economy- well there is a very long way to go. Having lived in several western countries and in SE Asia, I can't see the easy parallel being drawn. These are very different social systems.

[rollin]

China will approach fuel and material discontinuities long before it achieves a similar overall lifestyle to the current USA. The reduction in oil exports due to increasing internal usage will be one of the large factors limiting Chinese growth. Increased demand from other growing populations and developing countries is also going to limit growth on a worldwide basis. External markets for their products will also diminish with time.

I asked an engineer who had worked in different parts of China over the last 20 years if he thought they could afford to maintain the huge infrastructure they were building. He simply answered "No.". They will probably bounce up against the huge cost of maintaining infrastructure in a resource diminished world by the late 2020's if not earlier. By 2030 they will be in a similar position to the USA with a failing industrial economy.

Everything is happening faster for developing countries due to the huge demands and decreasing resources. Their heyday is right now, their descent is not long from now. If we add in the steady agricultural, economic and infrastructure damage pressure from climate change, it is not a great time to be trying to get to the top. China would do better to assume a fast descent model rather than a growth model.

[Plantagenet]

Chinese cities are clean, modern and safe, with high-speed rail intercity mass transit, and modern subways and light rail now present in the largest cities. There are no ghettoes in Chinese citites. When you compare Chinese cities with US cities, China has already matched and perhaps even exceeded the US level.

[C8]

Gotta wonder if China will be the nuclear leader in 30 years, they could easily build 1,000 plants by then if they devoted the resources to it. It may give them the energy they need. While the rest of the world worries about nuclear, China has already shown a lack of concern for many things other nations find repulsive. They put up with incredible smog, massive dams that flood whole communities, horrendous work conditions. Why wouldn't they go hog wild on nukes? Sure might put them in the electricity drivers seat for the next 100 years. Certainly it will make Japanese folks nervous about fallout.

[Tanada]

Gotta wonder if China will be the nuclear leader in 30 years, they could easily build 1,000 plants by then if they devoted the resources to it. It may give them the energy they need. While the rest of the world worries about nuclear, China has already shown a lack of concern for many things other nations find repulsive. They put up with incredible smog, massive dams that flood whole communities, horrendous work conditions. Why wouldn't they go hog wild on nukes? Sure might put them in the electricity drivers seat for the next 100 years. Certainly it will make Japanese folks nervous about fallout.

If you look even a little bit into history you will see this is not a Chinese tendency but a Human tendency, Germany/France/UK/USA/Canada all suffered from horrible air pollution and water contamination from industrialization. In the USA the creation of the TVA dam system followed by the large dam construction period that created the Hoover, Boulder, Grand Coulee, Chief Joseph, John Day and other big hydro projects west of the Mississippi river that flooded whole communities out of existence. Sweat shops were also pretty common in the USA right into the early 1950's because people are willing to work long hours at low wages if it means they can feed their families and provide them with minimal shelter. Union friendly laws and worker friendly laws cut that way down in the USA for a couple of generations, but it took a long time. China is just beginning its industrial journey if you look at it in the time context it took the 'western world'. As far as that goes the first couple of nuclear plants built by the UK were extremely risky, but nobody realized it at the time. These days every nuclear engineer knows the risks and can design a safe plant, but the plants are only as safe as the owner or the government requires them to be because safety is a cost. In the USA and Europe nuclear power is buried in safety regulations, in the former USSR they were not, in today's China I have no idea how stringent the safety standard are. They could be very high, very low, or somewhere in the middle.

[ROCKMAN]

rollin – “The reduction in oil exports due to increasing internal usage will be one of the large factors limiting Chinese growth.’ Or maybe not. That’s the point I bring up about all the various Chinese refinery JV’s and other efforts to tie up oil via direct ownership and long term contracts. ELM will continue to reduce the amount of oil Saudi Arabia exports. That doesn’t necessarily mean China will receive less oil from the KSA…just means someone will. As it looks now China’s share of oil imports may increase from some countries even as ELM reduces the amount they export overall.

In the end PO is only a negative factor for those getting a smaller piece of the pie. Global oil production may decline someday soon but that doesn’t mean Chinese oil consumption will decline along with.