Rich On Money

China Industrialization and Energy Use

Occasionally, you read a story that really blows you away, because it tells you that the world has truly changed in a big way. Back in the 1990’s, there was a point where the market value of Microsoft for the first time eclipsed the market value of IBM. It was so significant because IBM was a hardware manufacturer for decades that gave software away, while Microsoft was a software creator that manufactured no physical products. The world had changed.

Today it was reported that for the first time in 100 years, the United States has been eclipsed in energy consumption by China, which is now the number 1 user of the earth’s energy resources. This is especially noteworthy when you consider that so much of our energy goes into fueling cars, while in China vast amounts of energy are used to power manufacturing facilities.

Saudi Arabia is beginning to ship more of its oil production to China than the United States for the first time, and the Saudis are now the biggest producers of oil in the world so this means something. We still used roughly 19 million barrels of oil each and every day compared to 9.2 million barrels for China. Energy usage however is not based just on oil but includes nuclear power, coal, natural gas and the renewables, including wind and hydropower.
Just ten years ago, China was using half the energy of the United States. What we witnessed this month was not supposed to happen for years. So much for economic forecasting. In the end it’s going to come down to a showdown between the US and China for supremacy.  Now that can mean many things, economic, military, or geopolitical.
Of course there is always the issue of the fallaciousness of straight line extrapolations, which means the future is not a reflection of the past. Just as in the late 1970’s, many economists believed in the concept of the coming Japanese super state, many of the disciples of those very same economists believe that China will be the next super state. Stuff happens, countries like people get derailed. They experience downdrafts, peaks and valleys. We will just have to wait and see, but at the same time, be careful how you invest your money.