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Outpacing U.S., China now the world's largest gorger of energy Add to ...

China has leaped ahead of the United States as the world's largest energy consumer, marking yet another tectonic shift in the global economic order.

Already this year, China has sped past the United States as the largest auto market on the planet and moved ahead of Germany as the world's No. 1 exporter. Now, driven by a seemingly endless series of major infrastructure projects as well as rising demand from its fast-growing consumer class, China's energy consumption is outstripping the U.S., according to the International Energy Agency.

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China last year consumed 2.252 billion tonnes of oil equivalent of energy from sources including coal, oil, natural gas, hyrdro and nuclear power, about 4 per cent more than the United States, the IEA said told the paper. The U.S. had held the title of the world's biggest energy user since the early 1900s.

Ascendance to the top spot underscores the rising influence of the world's fastest growing major economy and the reordering of international power following the global financial crisis. China's oil-equivalent consumption, which includes crude oil, nuclear, coal, natural gas and hydropower, was just half the size of the U.S. 10 years ago.

"It shows the importance of the Chinese economy and it is being better reflected in consumption of energy, raw materials and the trade flows rather than the nominal GDP data" said Na Liu, founder of CNC Asset Management Ltd., a Toronto-based investment firm focused on Chinese equity markets and global raw materials.

Weak economic growth in the U.S. coupled with more stringent energy efficiency programs has crimped the intensity of U.S. energy demands. At the same time, the energy needs of China's economy, which expanded by 10.3 per cent in the second quarter, have soared due to rapid urbanization and improving living standards for its 1.3-billion citizens.



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China is expected to surpass Japan as the world's second largest economy later this year and is on track to become the world's largest economy by as early as 2027. It is already the world's largest emitter of carbon dioxide and other greenhouse gases as the vast majority of China's voracious power needs are met by burning coal.

"As China overtakes the U.S. as the world's largest energy consumer it is not only a domestic issue for China, but has repercussions for the rest of the world, not only in supply terms, but also how energy is consumed," IEA chief economist Fatih Birol told Bloomberg News.

"If China uses electric cars, hybrids and so on, they will impose the manufacturing line on most of the rest of the world."

China is expected to maintain a voracious appetite for energy and energy products as its economy shifts towards more consumer driven demand. In June, China posted record crude oil imports of 5.4 million barrels per day, meaning that more than 50 per cent of the country's oil consumption is now being supplied by foreign sources.

So far this year, China's crude oil imports are running at an average 4.77 million barrels per day, up a massive 30.2 per cent year over year.  Total crude oil consumption was 8.71 million barrels per day on average, up 18.6 per cent year over year.

In order to satisfy its soaring consumption needs, China has invested billions of dollars in overseas oil projects in places including Brazil, Africa and the Middle East. China's state-backed energy companies have also made smaller energy-related investments in Canada, where it is unclear whether the federal government would approve a Chinese acquisition of a controlling stake in major Canadian resource assets.

Chinese oil giant Sincopec recently paid $4.65-billion (U.S.) for a 9 per cent interest in Syncrude Canada, and PetroChina offered $1.9-billion for a 60-per-cent interest in two Athabasca Oil Sands Corp. projects.

China's fast-rising energy demands will require investments of some $4-trillion over the next two decades to power economic growth and avoid fuel shortages and electricity blackouts, according to the IEA.

"I'm still a bull for energy," said Mr. Liu. "If you believe the Chinese economy is going to gradually become a consumption-based economy rather than an investment-based economy, that is what you are looking at. Consumption of energy will continue to go higher," he said.

Although it is rapidly expanding alternative energy projects such as nuclear, wind, solar and hydroelectric, China still derives an overwhelming majority of electricity from coal. Its coal consumption accounted for about 45 per cent of the world's output last year and is expected to consume about half of the world's coal production in 2010.

The U.S. is still the world's largest energy consumer per capita, with the average American burning five times as much energy as the average Chinese citizen, according to the Wall Street Journal. The U.S. also remains the largest oil consumer, devouring an average of about 19 million barrels of oil per day.

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