China's Choke Point

Michael J. Economides, co-author with Ron Oligney of the Pulitzer Prize-nominated The Color of Oil: The History, the Money and the Politics of the World’s Biggest Business, turns to an analysis of China’s energy future in his new book, Energy: China’s Choke Point. He examines how the nation arrived at its current place in history and describes how its past will shape its future.

According to Economides, the Chinese dragon has awakened, and it is poised to become one of the most influential countries in the world.

“There is no question that China will emerge as the economic superpower of the world in the not-too-distant future, but there is also no question that energy, in short domestic supply, could cause economic slowdown or even a stop,” Economides says.

“China needs a far-reaching energy policy, and the stakes are huge—not just for the country itself, but also for the U.S. and the rest of the world.”

Economides is editor-in-chief of Energy Tribune, and a consultant, educator and Ph.D petroleum engineer who has done technical and managerial work in more than 70 countries. A professor at the Cullen College of Engineering, University of Houston, he has written or co-written some 200 articles and peer-reviewed papers and 11 textbooks.

In the following excerpts, Economides sets the tone for the book.

—Judy Maksoud

A history without parallel

Residents of Chengdu enjoy a springtime evening in the downtown shopping district.

For most foreigners, experts and common people alike, modern China has evolved at the grandest and fastest of paces but also as a mass and a mess of contradictions with no parallel in human history.

Understanding China’s past and culture should be a high priority for the world because such understanding would prepare all—including the Chinese people themselves—for the times ahead. China’s culture, the mentality of its people and its work ethic, unleashed about 30 years ago, have worked a bona-fide miracle that is unlikely to ever be matched by any other nation.

China is certain to become the dominant economic powerhouse in the coming decades, but it will not evolve into an aggressive militaristic superpower like prewar Japan, the U.S. and the Soviet Union during the Cold War, or even brutish Russia under Vladimir Putin. Instead, it will attempt to accomplish its aims and gain its rightful position in the world through finesse, behind the scenes or under the table, and by demonstrating its relevance through economic prowess.

It would be a mistake to assume that such posture is nonaggressive. China’s way of doing things, firmly rooted in its culture and history, will be quite different from the ways of other recent superpowers. However, a critical element of modern life—energy—which is in far shorter supply than is demanded inside China—will choke the nation’s path to world prominence. This time, China’s culture and nonbelligerent nature will hurt its chances, especially if the quest for foreign energy sources puts it on a collision course with the weakened but still reigning superpower, the U.S.

Fitting any country’s culture into a prescribed mold is difficult, but it is especially challenging in the case of China because of that country’s own difficulty in reconciling its history with the present and molding a national character. China is not even trying. Although many Chinese are proud of their country’s 5,000-year history, what really counts to them is what happened in the past 30 years, since Deng Xiaoping took firm control after the chaotic Cultural Revolution. The reasons for Chinese historic revisionism are many, and by themselves they shed a light on that nation….

Chengdu, the capital city of Sichuan province, is home to 11 million people. China is the first country to increase its oil consumption by 20% per year, which it accomplished for three consecutive years.

Communism, nurtured largely in Central Europe in the 19th century and professing egalitarianism—forced, if necessary—was supposed to put an end to all that, but it failed miserably. One of the most important reasons for the failure was that its biggest manifestation, the Soviet Union, was not nearly willing to forego its adherence to the idea of Mother Russia. The Soviet Union was not much more than a strengthening of traditional Russian hegemony over its neighbors and satellites. Its finest hour, which everybody else calls World War II, but which is known to Soviets as the Great Patriotic War, was never even thinly disguised as a triumph of the communist system but instead was presented as the strongest reaffirmation of Russia’s glorious history. South American and Western European armchair communists were far purer than any Russian communist.

A series of alien-inspired movements in China started on May 4, 1919, when a student movement called for the Chinese people to fight imperialism and feudalism and brought to China “democracy and science,” a notion that spread to only a few cities. For the more than 90% of the population that lived in rural areas, China had always been a feudalist society—until the Soviet-influenced communists took over power in 1949. The declared communists encouraged the masses, an overwhelming portion of whom were landless peasants, to take the land from their landlords.

Less than three years later, the land was taken back from the peasants through collectivization, eventually leading to the starvation and death of more than 30 million people. By then, egalitarianism meant “equal poverty for the masses.” The power elite had everything—the land, the factories, the businesses, and the masses to control and dispose of at leisure. Communism as applied in China has had little ideological foundation but has proven a handy mechanism with which to manage the country.

The vast majority of the Chinese people today seem not to bother with the nuances of Western democracy and human rights, and in a unique way, modernity comes with a dose of almost vindictive rejection of the country’s past….

Energy’s choke-hold

China could continue on its path, a unique mixture of controlling centralization, docile population, and under-the-table deals and power, all superseded by pride in its spectacular 30-year accomplishments, except that energy, the commodity that runs the modern world, is in short supply and will certainly get even shorter.

?Chinese auto sales surpassed the U.S. figure in May of this year totaling 1.12 million units, according to the China Association of Automobile Manufacturers. In contrast, U.S. car sales fell 34% in May to 925,824 units. Above, rush-hour traffic in Beijing slows to a crawl.

Energy hunger has caused China’s energy sector to grow by leaps and bounds. A few statistics bolster the point:

From 2000 onward, more than half of the growth in global energy demand came from China.

In 2003, China became the world’s second-largest oil consumer, surpassing Japan.

The U.S. Energy Information Administration predicts that China’s oil demand will reach 12.8 million barrels per day by 2025—75% of this oil will be imported.

China’s voracious appetite for energy of all kinds—coal, oil, gas and electricity—simply cannot be met by continuing the current centralized, state-controlled system, because that system is adapting too slowly to today’s surging energy markets. Private investors in the energy sector must be allowed—or even encouraged—to deliver the energy needed to fuel China’s burgeoning economy. If those investments are not made, China’s surging gross domestic product (GDP)—which the National People’s Congress plans to grow at 8% per annum through 2020—will simply not be achievable.

Although China has plenty of coal, there are several reasons the country cannot meet its energy demand with coal in the foreseeable future. The first is clear: environmental. But even if the cleanest coal technology were adopted, even if all dirty coal plants were replaced, and even though China has been adding one new coal-fired power plant per week, coal still cannot replace oil, because virtually no oil is used for power generation and nothing but oil is used for transportation.

China may be poised to do what is just political sloganeering in the West, which is burdened by trillions of dollars of existing infrastructure: go electric. Consider this: in the U.S. there are more than 110 cars per 100 people; in China it is still fewer than 10 cars per 100. Electrifying the transportation of the future, a proposition of staggering magnitude, may be China’s only real hope. But this will require imagination and thinking outside of the box, something not prevalent in China.