Fueling China's Growing Automobile Density Rate: Some Back-of-the-Envelope Calculations for the 2030-2050 Interval

By Sohn, Ira | Indian Journal of Economics and Business, December 2010 | Go to article overview

Fueling China's Growing Automobile Density Rate: Some Back-of-the-Envelope Calculations for the 2030-2050 Interval


Sohn, Ira, Indian Journal of Economics and Business


Abstract

China is expected to increase its automobile density rate--the ratio of automobiles to population--as living standards increase. Increasing automobile ownership will increase demand for oil over the next 20-40 years. Section H contains background information on the Chinese economy for the 1970-2005 interval, along with projections to 2030 and 2050. Section III discusses the automobile density rate and the automobile-specific assumptions. Section IV presents the projections of the gasoline (and oil) requirements needed to satisfy China's future automobile demand. I conclude with some impacts that enhanced Chinese automobile ownership will likely have on the global economy.

I. INTRODUCTION AND OVERVIEW

"Nothing can stop the car being the most coveted product that comes with development". (Carlos Ghosn, CEO of Renault-Nissan (The Economist, 2008, p. 4)

While political leaders and policy-makers in many of the G20 nations are focused on reducing fiscal imbalances, promoting employment growth, and repairing their crippled financial systems in order to avoid a recurrence of the financial debacle that plunged the world economy into its deepest recession since the Great Depression, it is important not to lose sight of one of the major public policy issues that confronts the global economy as we enter the second decade of the 21st century: the energy/environment conundrum.

This issue, of course, was "front and center" in the December 2009 conference convened by the United Nations in Copenhagen that failed to find agreement on adopting a binding international treaty that would first cap, and then reduce, harmful greenhouse gas emissions to 2050 to replace the existing (non-binding) 1997 Kyoto protocol, some of whose provisions begin to expire in 2012.

The flip side of the environmental dilemma is the issue of securing affordable, reliable, and accessible mineral resources to enable worldwide living standards to increase during the next 40 years as they have over the previous 40 years. The specific issue of energy supply security--and more precisely, securing the required supplies of oil and natural gas--along with insuring adequate supplies of some key non-fuel minerals is contributing to geopolitical stress as the large resource-consuming (and importing) countries scour the world to lock in long-term agreements for supplies of these essential ingredients that play so critical a role in their standard of living.

In addition, another critical long-term issue that is becoming more and more visible on the radar screens of political leaders and policy-makers in both the developed and developing countries is managing the shift in economic firepower from the "G7" countries to the "E7" countries--China, India, Brazil, Russia, Turkey, Indonesia, and Mexico--where, "in 20 years time, with more than a 40% share of world GDP, these nations will dwarf the G7's" (Geoghegan, 2009).

This paper provides some "back-of-the-envelope" estimates of the direct gasoline (and oil) requirements that will be needed by China's automobile sector as vehicle ownership rapidly expands in tandem with economic development over the next 20-40 years. The impact of China's remarkable and still unfinished development program, initiated around 1980, on its demand for minerals--both fuel and non-fuel--is nothing less than astounding. (Please see Tables 1 and 2, below).

With living standards in China approaching the threshold level where automobile ownership increases dramatically, over the next 20-40 years it is projected that China's fleet of vehicles will have overtaken America's by 2030, and by 2050, China is projected to have as many cars as the entire world has today, about 700 million vehicles (The Economist, 2008). Consequently, it is of interest to provide some "ball-park" estimates of China's automobile sector's demand for oil--the essential fuel for automobiles--in 2030 and 2050 in light of the growth prospects for the Chinese economy and its increasing automobile density rate. …

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