China is now world largest economy based on energy consumption.

[c1ue]

Re: China is now world largest economy based on energy consumption.

I'm thinking the purchasing power parity versus exchange rate basis for GDP is the cause of the discrepancy.

You are correct.

I will, however, point out that any nation that imports energy - purchasing power parity is irrelevant. Dollars is what matters.

Thus the DOE numbers (per dollar GDP) is far more relevant because there is a quantifiable relationship between GDP and ability to purchase foreign energy.

[ThePythonicCow]

Re: China is now world largest economy based on energy consumption.

It's not a per-capita thing

Hmm... try doing a search for the phrase "GDP per capita" on the Wiki webpage energy intensity and after you notice that that's what they're using in several places on that page, tell me if you still think that the difference between the graph you posted from that webpae and the DOE EIA statistics is not due to a per-capita thing.

[ThePythonicCow]

Re: China is now world largest economy based on energy consumption.

On the other hand, perhaps it is more accurate to say that there are at least three differences between the Wiki graph and the EIA statistics:

1. The Wiki uses per-capita; the EIA "per-nation"
2. The Wiki uses GNP; the EIA GDP
3. The Wiki uses purchasing power parity; the EIA uses official exchange rate

This is getting to be more like an apples versus socket wrenches comparison than an apples versus oranges comparison

[gnk]

Re: China is now world largest economy based on energy consumption.

Once again...it takes VERY LITTLE ENERGY to create GDP from financial assets [how much energy is needed to create a CDO cubed and flog that off to some idiot European bank or pension fund manager?]. 2006 was close to the peak of the US "financial economy". The comparisons are apples and oranges.

Now that finance is busted it will be interesting to see how things unfold in this decade. Will China become "more financialized", and therefore less "energy intensive"? Will the USA actually be able to "reindustrialize"? Will one nation see improvements in "energy intensity" [albeit starting from a low efficiency base] while the other sees "deterioration"? Does it really matter, given there is not any shortage of energy in all its myriad forms?

Well said, I agree with your "financialization" of our gdp description.

But let's forget about the unit of account characteristic of money. Let's think of it this way:

In the US, on a typical weekday, about 12 million people go to work in manufacturing.

In China, on a typical weekday, about 112 million people go to work in manufacturing.

http://www.manufacturingnews.com/new...nesewages.html

Granted, those are 2009 numbers, and the US tends to produce more high margin, high end products. But at the end of the day, I just don't see current GDP measurements being that accurate when comparing China and the US. They have a billion more people than we do, and they are increasingly no longer walled off from the global economy.

GRG55 - do you believe that China's ascension won't put a future constraint on energy? They have about a billion more people to go in terms of a modern industrial lifestyle.

[gnk]

Re: China is now world largest economy based on energy consumption.

You are correct.

I will, however, point out that any nation that imports energy - purchasing power parity is irrelevant. Dollars is what matters.

Thus the DOE numbers (per dollar GDP) is far more relevant because there is a quantifiable relationship between GDP and ability to purchase foreign energy.

We purchase foreign energy by printing the world's reserve currency. Wouldn't that skew the comparison?

[c1ue]

Re: China is now world largest economy based on energy consumption.

We purchase foreign energy by printing the world's reserve currency. Wouldn't that skew the comparison?

No, at least not directly.

The numbers are for domestic GDP, not money supply, vs. energy use.

[gnk]

Re: China is now world largest economy based on energy consumption.

No, at least not directly.

The numbers are for domestic GDP, not money supply, vs. energy use.

When one compares just China to the US, I would say domestic gdp is affected. I hold the view that money, credit, and oil are the trinity of our economy i.e. they are one.

China needs to export goods to recieve money to purchase oil. We only need to consume imports and run an account deficit to keep the world's reserve currency going.

I mention this a lot and I think it's relevant here: Triffin Dilemma

In my opinion, our gdp is vastly inflated not only by the large Ponzi sector (finance - especially housing from purchase mortgages to CDOs) but also by having the world reserve currency - the "exorbitant privilege." Remove those two - and our economy suffers tremendously. Now one can argue that if we lost the reserve currency - all economies would suffer because of contagion. Until of course, the world economy rebalances with a new system.

[c1ue]

Re: China is now world largest economy based on energy consumption.

We purchase foreign energy by printing the world's reserve currency. Wouldn't that skew the comparison?

Neither the Fed nor the Treasury purchase any significant amounts of foreign energy.

Therefore how can your statement be correct?

What would be more correct would be to say that the balance of world trade which is denominated in dollars - allows greater retention of US dollar purchasing power despite Fed and Treasury printing by spreading out the dilution to a larger pool.

Remove the dollar from the world reserve currency - and the printing by the Fed would immediately result in Argentina-like effects.

[gnk]

Re: China is now world largest economy based on energy consumption.

Neither the Fed nor the Treasury purchase any significant amounts of foreign energy.

Therefore how can your statement be correct?

What would be more correct would be to say that the balance of world trade which is denominated in dollars - allows greater retention of US dollar purchasing power despite Fed and Treasury printing by spreading out the dilution to a larger pool.

Remove the dollar from the world reserve currency - and the printing by the Fed would immediately result in Argentina-like effects.

Exactly.

We both agree - and that's exactly what I was describing. My initial statement wasn't meant to be literal - that the Fed and Treasury buy oil by printing - but that we have the world's reserve currrency (which is much easier to expand than other countries' currencies) that gives us an advantage over most other countries in terms of buying foreign resources.

I didn't spell it out as you did because I assume on this site people have that foundational knowledge that 99.9% of the rest of the population does not. But look at my follow up post above - where I link the Triffin Dilemma. That spells it out in more detail.

[c1ue]

Re: China is now world largest economy based on energy consumption.

We both agree - and that's exactly what I was describing. My initial statement wasn't meant to be literal - that the Fed and Treasury buy oil by printing - but that we have the world's reserve currrency (which is much easier to expand than other countries' currencies) that gives us an advantage over most other countries in terms of buying foreign resources.

I'm not sure I agree that your position - as I understand it - is the same as what I'm saying.

1) The US dollar as a reserve currency has a much larger pool of actual trade/product/value it represents than just the US GDP. This much larger pool means that an expansion of say $1T dollars has less of a dilutive effect than if Zimbabwe were to expand the Zimbabwe dollar by Z$1T.

2) While the US has been creating dollars via Fed machinations in conjunction with the TBTF banking entities, the actual money supply as well as credit supply has been shrinking. But equally so, world trade has been shrinking. Thus the pool mentioned previously is significantly smaller than it was - world trade is down at least 20% and likely more from peak levels of say 2006 or 2007.

3) Even so, the price of oil in dollars is still extremely high. If indeed the US were getting a free ride via dilution of a smaller pool, why then is the price of oil 3x what it was only 6 years ago?

Year

Nominal

Inflation Adjusted

2003	$27.69	$32.82
2004	$37.66	$43.42
2005	$50.04	$55.80
2006	$58.30	$63.02
2007	$64.20	$67.37
2008	$91.48	$92.31
2009	$53.48	$54.24
2010 Partial	$70.67	$70.84

While the Fed has allowed a pile of money/credit to be created, it has not tripled the dollar supply. The federal deficit, in contrast, has gone up a lot:

2003	6,760.0	62.6	3,913.4	35.1
2004	7,354.7	63.9	4,295.5	37.3
2005	7,905.3	64.6	4,592.2	37.5
2006	8,451.4	65.0	4,829.0	37.1
2007	8,950.7	65.6	5,035.1	36.9
2008	9,985.8	70.2	5,802.7	40.8
2009	12,311.4	86.1	7,811.1	54.6
2010 (30 june)	13,203.1	90.5 (1st Q)	8,633.7	59.0 (1st Q)

But it only doubled in the same time frame as oil tripled.

If indeed Fed printing is diluted by the huge volume of world trade, then neither credit supply, money supply, nor US deficit levels should be corresponding more than 1 to 1 vs. commodity prices.

Clearly there are other factors.

[don]

Re: China is now world largest economy based on energy consumption.

China’s Just a Place

July 21, 2010
The mainstream press is abuzz this week with the “news” that the United States, after 100+ years, has now been surpassed as the world’s No. 1 energy consumer. IEA Paris, following the BP Statistical Review in June, has decided to call this race in favor of China. However, this is really not a story of today. Rather, it’s a story of the past decade. Only the confluence of several powerful forces could have delivered China to its current position. The press should have been paying closer attention. Moreover, the real story here is in China’s growth in coal consumption–the energy source China drew upon to first match, and then surpass, the United States.


Let’s take a look first at BP’s data assessment for 2009 energy use, vs. IEA Paris. Our unit of account here is the mtoe–million tons oil equivalent. This is a unit of energy, not volume, and measures BTU. Also, a note: IEA Paris apparently is including Hong Kong in their data so I have added Hong Kong also to mainland China from the BP Statistical Review (which tracks them separately). For 2009, BP has China edging the USA by nearly 19 mtoe, and IEA Paris has China exceeding the USA by a more substantial 82 mtoe. | see below: BP vs IEA Paris:


China and USA 2009 Energy Use in MTOE.





What the chart doesn’t tell you is the composition of each country’s energy consumption. While many are aware the US is a heavy user of oil, there is less attention paid to China’s heavy use of coal. Let’s compare the two, shall we? Oil in the US represents nearly 39% of total energy use from all sources. But in China, oil barely represents 19% of total energy use. Most important of all: China’s coal use is four times its oil use.


Whereas in the United States oil demand is not a reflection of strong exports, in China the extraordinary mix of coal to oil use is very much of a reflection of worldwide manufacturing, and global demand for those goods. In other words, China is just a place where the world performs a great deal of its physical labor. Perhaps this is why Beijing is “unhappy” with this week’s media focus on the country’s energy demand. Or, perhaps not. China appears to be refuting the data itself, rather than making the more salient point: much of that coal demand is from you and me, here in the West. China’s coal consumption is merely our own power consumption, offshored. And while the composition of that demand will surely tip in the year’s ahead to a more domestic focus in China, this is yet another illustration that the world’s demand for energy is still very much satisfied not by oil, but by coal.


http://gregor.us/coal/chinas-just-a-place/


Gregor MacDonald is interviewed in 2nd half:

[touchring]

Re: China is now world largest economy based on energy consumption.

Whereas in the United States oil demand is not a reflection of strong exports, in China the extraordinary mix of coal to oil use is very much of a reflection of worldwide manufacturing, and global demand for those goods. In other words, China is just a place where the world performs a great deal of its physical labor. Perhaps this is why Beijing is “unhappy” with this week’s media focus on the country’s energy demand. Or, perhaps not. China appears to be refuting the data itself, rather than making the more salient point: much of that coal demand is from you and me, here in the West. China’s coal consumption is merely our own power consumption, offshored. And while the composition of that demand will surely tip in the year’s ahead to a more domestic focus in China, this is yet another illustration that the world’s demand for energy is still very much satisfied not by oil, but by coal

I find MacDonald's article ridiculous. Obviously, he has not been to China. China can consume a lot of coal outside of the manufacturing sector.

[gnk]

Re: China is now world largest economy based on energy consumption.

c1ue - I never said it was a sustainable model, hence the "dilemma" in "Triffin Dilemma." Obviously, the system is cracking. But I brought this up initially because people on this thread were comparing oil use and gdp of various countries. What was neglected, IMHO, is that these different countries have fundamentally different types of currencies that ultimately affect their account surpluses/deficits. The EU, with the Maastricht rules, functions as a gold standard of sorts - especially today with the adoption of fiscal austerity measures. China, OTHO, has a pegged currency - to the downside - it is kept artificially low. The US, of course, has a free floating currency but it is also the world's reserve currency that can be printed at will - or at least, much more than any other country. And from "printing" I mean both monetary and fiscal measures. It has worked pretty well over the last 40 years or so... will it continue to work? Is it in the midst of a slow collapse?

That remains to be seen. Bottom line, our economy enjoys (has enjoyed?) an advantage over most economies in the world. But to a point. My fear is that the factors that have propped up much of the economy, when they go away, will be disastrous for the economy - more so than many other countries. We have a higher ledge to fall from, so to speak.

[c1ue]

Re: China is now world largest economy based on energy consumption.

It has worked pretty well over the last 40 years or so... will it continue to work?

It all depends on your point of view.

In 1945, the United States possessed 90% of the world's gold (according to Dr. Michael Hudson) - said gold was in fact not far removed from actually being money (yes, that again )

Since the '50s, this percentage has been falling.

Similarly it could be argued that the US standard of living has been stagnant since the '60s onward.

So just how successful was this policy, both in the short term and the long term, for the American people?

On the other hand, how successful has this policy been for FIRE? For politicians?

My view has consistently been that this is all a Ponzi scheme, and like all Ponzi schemes must end badly.

We WILL get to experience this firsthand.

I merely hope it is Argentinean as opposed to something worse.

[touchring]

Re: China is now world largest economy based on energy consumption.

I think the world is starting to pay for the price of this huge spike in coal usage:

Abnormal weather conditions are being seen around the world.
Countries in the northern hemisphere are experiencing their hottest summers while those in the southern hemisphere are shivering from the unusual cold fronts.
A heat wave has scorched much of Russia and Europe killing over 1,600 people in Russia alone either by drowning as they hoped to escape the heat in bodies of water or from heat stroke.
And in Ukraine city fountains and beaches along the country's rivers have become prime destinations for those wishing to beat the unusually hot temperature.


[Interview : ] "Well, the weather is good in general, but it's too hot. And that's bad. It's hitting you in the head. It's unbearable outside. We want to play football with the boys, but we are not allowed to."

With temperatures soaring near 40 degrees Celsius in Russia the country is also suffering from its worst drought in over 100 years.
The Russian agricultural industry stated that the combined loss could amount to over 1-billion US dollars and added that a state of emergency has been declared in 16 regions.
However on the other side of the world cold air masses continue to linger above nations like Bolivia and Peru bringing with them freezing temperatures.


[Interview : ] "It's usually cold here in El Alto, but not this cold. This last week, temperatures have dropped a lot."

The unusual cold front has killed over 80 people in Latin America and left scores of others suffering from respiratory illnesses.
Countries all over the world are keeping themselves alert to prevent further casualties.
And environmental groups like Greenpeace have pointed to global warming as the main cause of the unusual weather conditions.
Kim Hyo-sun, Arirang News.

Perhaps we'll see a real life version of The Day After Tomorrow come 2012.