Discussing peak oil, with Matthew Simmons, Simmons & Co. international chmn and CNBC's Becky Quick
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Sunday, 4 November 2007
The Long Emergency - Peak Oil
The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century
Thursday, 20 September 2007
Economic Growth and the Environment
Doha and Dalian
By THOMAS L. FRIEDMAN
Published: September 19, 2007
In the last few weeks, I happened to visit Doha and Dalian, and I must say: I was stunned.
Before explaining why, let me acknowledge that chances are you’ve not visited Doha or Dalian recently. Indeed, it may be — I presume nothing — that you have never heard of either city. Doha is the capital of Qatar, a tiny state east of Saudi Arabia. Dalian is in northeast China and is one of China’s Silicon Valleys because of its proliferation of software parks and its dynamic, techie mayor, Xia Deren. What was stunning is that I hadn’t been to either city for more than three years, and I barely recognized either one.
In Doha, since I was last there, a skyline that looks like a mini-Manhattan has sprouted from the desert. Whatever construction cranes are not in China must be in Doha today. This once sleepy harbor now has a profile of skyscrapers, thanks to a huge injection of oil and gas revenues. Dalian, with six million people, already had a mini-Manhattan when I was last here. It seems to have grown two more since — including a gleaming new convention complex built on a man-made peninsula.
But this, alas, is not a travel column. It’s an energy column. If you want to know why I remain a climate skeptic — not a skeptic about climate change, but a skeptic that we’re going to be able to mitigate it — it’s partly because of Doha and Dalian. Can you imagine how much energy all these new skyscrapers in just two cities you’ve never heard of are going to consume and how much CO2 they are going to emit?
I am not blaming them. It is a blessing that their people are growing out of poverty. And, after all, they’re just following the high-energy growth model pioneered by America. We’re still the world’s biggest energy hogs, but we’re now producing carbon copies in places you’ve never heard of.
Yes, “Americans” are popping up all over now — people who once lived low-energy lifestyles but by dint of oil wealth or hard work are now moving into U.S.-style apartments, cars and appliances.
Our planet cannot tolerate so many “Americans,” unless we take the lead and change what it means to be an American in energy terms. Attention Kmart shoppers: the world consumed about 66.6 million barrels a day of oil in 1990. We’re now consuming 83 million barrels a day.
“Demand for oil has grown 22 percent in the U.S. since 1990. China’s oil demand has grown nearly 200 percent in this same period,” Margo Oge, director of the Environmental Protection Agency’s office of transportation and air quality, told the Tianjin China Green Car conference that I attended. “By 2030, the global thirst for oil is forecast to increase by another 40 percent if we maintain business as usual.” Such an appetite would devour every incremental green initiative we make.
Hey, I’m really glad you switched to long-lasting compact fluorescent light bulbs in your house. But the growth in Doha and Dalian ate all your energy savings for breakfast. I’m glad you bought a hybrid car. But Doha and Dalian devoured that before noon. I am glad that the U.S. Congress is debating whether to bring U.S. auto mileage requirements up to European levels by 2020. Doha and Dalian will have those gains for lunch — maybe just the first course. I’m glad that solar and wind power are “soaring” toward 2 percent of U.S. energy generation, but Doha and Dalian will devour all those gains for dinner. I am thrilled that you are now doing the “20 green things” suggested by your favorite American magazine. Doha and Dalian will snack on them all, like popcorn before bedtime.
But, as I said, this is not just about “them.” It is still very much about us. Peter Bakker is the chief executive of TNT, the biggest express delivery company in Europe. The Dow Jones Sustainability Index 2007 just listed TNT as the No. 1 company in terms of energy and environmental practices. Mr. Bakker, whom I met in China, told me this story:
“We operate 35,000 trucks and 48 aircraft in Europe. We just bought two Boeing 747s, which, when fully operational, will do nine round trips every week between our home base in Liège [Belgium] and Shanghai. They leave Liège only partly full and every day fly back to Europe as full as you can stuff them with iPods and computers. By our calculations, just these two 747s will use as much fuel each week as our 48 other aircraft combined and emit as much CO2.”
That’s why we’re fooling ourselves. There is no green revolution, or, if there is, the counter-revolution is trumping it at every turn. Without a transformational technological breakthrough in the energy space, all of the incremental gains we’re making will be devoured by the exponential growth of all the new and old “Americans.”
Friday, 24 August 2007
Our Financial System -- How money is created and it's implications
Can our economy maintain perpetually accelerating growth?
Can our environment maintain perpetually accelerating growth?
Part 1
Part 2
Part 3
Part 4
Part 5
Tuesday, 21 August 2007
Monday, 20 August 2007
China's Economy
Economic View
A Chinese Century? Maybe It’s the Next One
By LESTER THUROW
CHINA claims that its economy is growing at 10 to 11 percent a year, and China’s official analysts say that their nation will catch up with the United States long before the 22nd century arrives.
Don’t believe it.
First, let’s deal with the implausibility of the official Chinese statistics.
Mathematically, if the overall economy were to grow 10 percent annually, and the 70 percent of the economy that is based in rural areas were not growing (as stated by the Chinese government), the economy in China’s cities would have to be growing by 33 percent a year. The urban economy is growing rapidly, but not at a 33 percent pace.
Furthermore, Chinese statistics conflict with those of Hong Kong, the semiautonomous territory that serves as the financial capital of much of southern China. In 2001, Hong Kong had a recession, which is to say that it reported that its gross domestic product fell. Guangdong, the adjacent Chinese province, has a population of around 200 million. In 2001, it reported that its G.D.P. grew by 10 percent. What are the chances that both of those numbers are correct?
Very slim.
Economic growth rates can be inferred from electricity consumption. In every country in the world, electricity use has generally grown faster than the G.D.P. Electricity is necessary for nearly all productive activities, and because of inefficiencies, consumption of electricity has generally outstripped economic growth. Rising energy costs have resulted in more efficient use of electricity, but especially in the developing world, economic growth has still generally lagged growth in electricity.
But if China’s official numbers are to be believed, there are provinces in China where the G.D.P. has been growing faster than energy use. That is unlikely, since the central government’s statistics also say that energy use per unit of G.D.P. is going up — not down, as claimed in provincial G.D.P. statistics.
Among the world’s 12 most rapidly growing economies over the last 10 years, the G.D.P. has grown only 45 percent as fast as electricity consumption.
In the early 1970s, Japan was shutting down its electricity-guzzling aluminum industry. During this period, the G.D.P. grew 60 percent as fast as electricity consumption, the highest recorded level among industrialized nations.
Using those numbers as a guide, if we consider China’s actual electrical use, which is relatively easy to measure, and do a little math, we come up with this estimate: The G.D.P. in China has been growing somewhere between 4.5 percent (using the average for a rapidly growing country) to 6 percent a year (using the highest rate for Japan), not at the 10 percent rate claimed in official statistics.
The official statistic for China’s overall growth rate is best regarded as an approximate growth rate of the economy of its cities.
China also officially claims that it will catch up with the United States and become the world’s largest economy well before the 22nd century arrives.
There is an equally simple reason that neither of these predictions is likely to be realized. It simply takes more than 100 years for a large, less economically developed country to catch up with the world leader in per capita income.
One need look only at the history of the United States, which had a much higher growth rate than Britain in the 19th century, yet did not catch up until World War I. Or consider Japan and the United States. Some 150 years after Japan started to modernize during the Meiji restoration, the country’s per capita G.D.P. is still only 80 percent of that of the United States in terms of purchasing power parity — although, in nominal terms, it has caught up.
The United States is not standing still. In fact, its per capita income grew faster than nearly all other big countries from 1990 to 2007. Europe’s per capita income fell from 85 percent of that of the United States in 1990 to 66 percent in 2007, according to International Monetary Fund statistics.
So let’s say that the inflation-adjusted growth rate for China is 4 percent a year. This is optimistic, because China will certainly have some bad years in the next century. Every country does — remember the Great Depression in the United States. A 4 percent rate is faster than any big country has ever grown for 100 years. But assume that China can do it. Assume, too, that America grows at the 3 percent rate it has averaged for the last 15 years.
Now project the two growth rates forward: the inflation-adjusted per-capita G.D.P. of China would be less than $40,000 in 2100, versus almost $650,000 in the United States. That’s because China starts at $1,000 per capita and the United States at $43,000.
If, in 2100, China has four times as many people as the United States, as it does now, China would still not have a total G.D.P. equal to America’s.
But it is unlikely to have four times as many people.
It is always a mistake to project population growth rates for a century, but let’s do it anyway: With a one-child policy and a sex ratio that favors boys (many men won’t find wives) — China should experience a decline in population in the 21st century.
Yet let’s assume for a moment that China’s population remains constant, at 1.3 billion. If immigration to the United States continued at the current rate, America’s population would rise. If the population grew at 1 percent a year, as it has recently, it would more than double by 2100, reducing the enormous population gap between the two countries.
Are these projections likely to be realized?
Who knows?
What is clear is that China is unlikely to surpass the United States in G.D.P. in absolute or relative terms anytime soon.
There may be a Chinese century, but it will be the 22nd century — not the 21st.
Lester Thurow is a professor of management and economics at the Massachusetts Institute of Technology. He is also on the board of Taiwan Semiconductor, which does business in mainland China.
A Chinese Century? Maybe It’s the Next One
By LESTER THUROW
CHINA claims that its economy is growing at 10 to 11 percent a year, and China’s official analysts say that their nation will catch up with the United States long before the 22nd century arrives.
Don’t believe it.
First, let’s deal with the implausibility of the official Chinese statistics.
Mathematically, if the overall economy were to grow 10 percent annually, and the 70 percent of the economy that is based in rural areas were not growing (as stated by the Chinese government), the economy in China’s cities would have to be growing by 33 percent a year. The urban economy is growing rapidly, but not at a 33 percent pace.
Furthermore, Chinese statistics conflict with those of Hong Kong, the semiautonomous territory that serves as the financial capital of much of southern China. In 2001, Hong Kong had a recession, which is to say that it reported that its gross domestic product fell. Guangdong, the adjacent Chinese province, has a population of around 200 million. In 2001, it reported that its G.D.P. grew by 10 percent. What are the chances that both of those numbers are correct?
Very slim.
Economic growth rates can be inferred from electricity consumption. In every country in the world, electricity use has generally grown faster than the G.D.P. Electricity is necessary for nearly all productive activities, and because of inefficiencies, consumption of electricity has generally outstripped economic growth. Rising energy costs have resulted in more efficient use of electricity, but especially in the developing world, economic growth has still generally lagged growth in electricity.
But if China’s official numbers are to be believed, there are provinces in China where the G.D.P. has been growing faster than energy use. That is unlikely, since the central government’s statistics also say that energy use per unit of G.D.P. is going up — not down, as claimed in provincial G.D.P. statistics.
Among the world’s 12 most rapidly growing economies over the last 10 years, the G.D.P. has grown only 45 percent as fast as electricity consumption.
In the early 1970s, Japan was shutting down its electricity-guzzling aluminum industry. During this period, the G.D.P. grew 60 percent as fast as electricity consumption, the highest recorded level among industrialized nations.
Using those numbers as a guide, if we consider China’s actual electrical use, which is relatively easy to measure, and do a little math, we come up with this estimate: The G.D.P. in China has been growing somewhere between 4.5 percent (using the average for a rapidly growing country) to 6 percent a year (using the highest rate for Japan), not at the 10 percent rate claimed in official statistics.
The official statistic for China’s overall growth rate is best regarded as an approximate growth rate of the economy of its cities.
China also officially claims that it will catch up with the United States and become the world’s largest economy well before the 22nd century arrives.
There is an equally simple reason that neither of these predictions is likely to be realized. It simply takes more than 100 years for a large, less economically developed country to catch up with the world leader in per capita income.
One need look only at the history of the United States, which had a much higher growth rate than Britain in the 19th century, yet did not catch up until World War I. Or consider Japan and the United States. Some 150 years after Japan started to modernize during the Meiji restoration, the country’s per capita G.D.P. is still only 80 percent of that of the United States in terms of purchasing power parity — although, in nominal terms, it has caught up.
The United States is not standing still. In fact, its per capita income grew faster than nearly all other big countries from 1990 to 2007. Europe’s per capita income fell from 85 percent of that of the United States in 1990 to 66 percent in 2007, according to International Monetary Fund statistics.
So let’s say that the inflation-adjusted growth rate for China is 4 percent a year. This is optimistic, because China will certainly have some bad years in the next century. Every country does — remember the Great Depression in the United States. A 4 percent rate is faster than any big country has ever grown for 100 years. But assume that China can do it. Assume, too, that America grows at the 3 percent rate it has averaged for the last 15 years.
Now project the two growth rates forward: the inflation-adjusted per-capita G.D.P. of China would be less than $40,000 in 2100, versus almost $650,000 in the United States. That’s because China starts at $1,000 per capita and the United States at $43,000.
If, in 2100, China has four times as many people as the United States, as it does now, China would still not have a total G.D.P. equal to America’s.
But it is unlikely to have four times as many people.
It is always a mistake to project population growth rates for a century, but let’s do it anyway: With a one-child policy and a sex ratio that favors boys (many men won’t find wives) — China should experience a decline in population in the 21st century.
Yet let’s assume for a moment that China’s population remains constant, at 1.3 billion. If immigration to the United States continued at the current rate, America’s population would rise. If the population grew at 1 percent a year, as it has recently, it would more than double by 2100, reducing the enormous population gap between the two countries.
Are these projections likely to be realized?
Who knows?
What is clear is that China is unlikely to surpass the United States in G.D.P. in absolute or relative terms anytime soon.
There may be a Chinese century, but it will be the 22nd century — not the 21st.
Lester Thurow is a professor of management and economics at the Massachusetts Institute of Technology. He is also on the board of Taiwan Semiconductor, which does business in mainland China.
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