How China Will Define the New Era of the Global Energy Landscape
by Tony Daltorio, Investment U Research
Monday, July 26, 2010
The International Energy Agency (IEA) just announced it, so it’s official. China is officially the world’s largest energy consumer.
The U.S. claimed that top spot for over a century. But after decades of rapid economic growth, China now holds the weighty title.
The IEA states how the Asian giant consumed 2.25 billion tons of oil equivalent last year. Comparatively speaking, the U.S. only used 2.17 billion.
Admittedly, Beijing disputes that claim. But even it has to admit to at least 2.17 billion tons, meaning it still ties for first at the very least.
That says a lot, considering that as of 2000, the U.S. used twice as much energy as China.
Of course, the average American burns five times as much as the average Chinese citizen. So the U.S. still consumes the most per capita.
China also places a distant second when it comes to oil usage. Its 9.2 million barrels a day pales in comparison to the U.S.’s 19 million. But that figure has doubled in just a few short years.
In the words of Faith Birol, the IEA’s chief economist, all of this “symbolized the dawn of a new era for the global energy landscape.”
China’s New Love Affair
There may very well be no greater symbol of this new energy era than the automobile.
The U.S. constructed its vast interstate highway system during the 1950s and 60s, perhaps the height of its economic power. Along with those roads came a sense of freedom to go anywhere and do anything.
Today, that same thing seems to be happening in China. Cars have become its liberation, just as they were in the U.S. all those decades ago.
That could have some profound implications for Chinese society. And it definitely will have huge implications on the global energy markets.
Carmakers everywhere are cashing in on China’s new love affair. The world’s largest vehicle market as of last year, sales rose 72% in the first quarter of 2010, year on year.
For the first time, General Motors now sells more vehicles in China than in the U.S. Bully for it, but the real moneymakers will be the many carwash chains, motor inns and restaurants built up in the future to accommodate the growing number of motorists.
They’ve already begun springing up and will continue doing so. So companies like Home Inns & Hotels Management ADR (Nasdaq: HMIN) should do quite well.
Despite bearish predictions of bubbles, China has wisely invested in infrastructure. And within a decade, it could even have a highway network that rivals that of the U.S.
That should only fuel more roadways and more car sales in the future.
A New Generation of Everything
The real driving force behind China’s new car culture is the younger generation.
One young driver captured it perfectly: “I like the speed. I like the freedom. I can’t imagine not having a car.” Sounds very much like an American teenager, right?
Ivo Naumann, the head of Alix Partners – a consultant to international car companies in China – has his own way of describing the situation. “It is the first time in their lives that Chinese people have individual mobility. It’s a piece of freedom for the Chinese people.
Already, 1950s-esque drive-in theatres are popping up around the country. And the Financial Times even noted one such attraction filled with jalopies, ponytail-sporting girls and waitresses on roller skates.
Of course, unlike in the U.S., China’s car boom is happening during the Internet age. So many youths are going online to join “car friendship clubs” to further their social lives.
Some of such groups in Shanghai have even caused traffic jams all by themselves. No surprise with tens of thousands of young drivers going to meet each other in a single spot.
Ironically, while China is just igniting its road romance, the West’s tryst is going flat. Europe and Japan’s younger generations especially are reluctant to buy cars these days.
That all means that Chinese youth will define the global automobile market’s future. And therefore, they’ll also largely define the global oil and energy markets as well.
Good investing,
Tony Daltorio
Related Investment U Articles:
- China’s Gold Rush
- Brazil Builds a ‘Highway’ to China
- How One U.S. Manufacturer is Turning the Tables on Chinese Auto Makers
- The Emerging Market in the Sweet Spot Between U.S. Demand and Chinese Growth
- China’s Oil Companies: The New Kids on the Oil Block
One Response to “How China Will Define the New Era of the Global Energy Landscape”
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I’m going head over heals for China and that’s where I’m putting my investment money – and have started with the purchase/import of a green energy wood fired gasifier and shall demonstrate the technology here in the UK. GREAT STUFF !!…and I’m only a spring rooster of 1932 vintage raring to go as a very willing Chinese revolution participant !!
td
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