The OECD Energy Conundrum

As far back as 2003, the OECD noticed that the economies of its members were moving apart, not converging. At the time, all the talk was about productivity due to adoption of information and communications technologies–some (notably the U.S.) were doing it better than others, and were making hay while the sun shone.

Fast forward a decade and the storyline is similar in some ways–the OECD countries are not converging–but the reasons why seem to be shifting. Everybody has jumped on the IT revolution, clasping it to their collective bosom. But not only are countries not getting more similar, they seem to be getting more different.

Actually, the explanation is pretty simple. Some countries that joined the OECD in more recent decades are not at all similar to the original membership. But the differences have consequences. Talking about the OECD as a monolithic bloc really doesn’t make sense any more.

And nowhere is this truer than when people talk about energy. And once again, the desire to analyze at a macro rather than a micro level is leading prognosticators and analysts perilously close to the same error they have made (and I hope to have highlighted here) about the developing (read: non-OECD) world. Just as we saw that China, India, Indonesia and others are set to grow much faster than agencies such as the Department of Energy and the International Energy Agency have predicted, so too will OECD members such as Mexico and Turkey. The slow (0.3% annual) growth that these agencies forecast for the OECD as a whole look woefully inadequate when looking at the younger, still developing developed countries.

PriceWaterhouse Coopers, in their paper ‘The World in 2050,’ predicted that Mexico would grow at the same rate (3.9% annually) as China through 2050. They predict that economic growth in Turkey would actually be faster, at 4.2% annually. That’s why the two countries were included in their new classification, the Emerging Seven, joining the usual suspects–China, India, Indonesia, Brazil and (oops!) Russia.

I personally believe both Turkey and Mexico should be included in the OECD. But I also believe that they both need and want to develop as much as China does. And if they do, their energy growth will not be the paltry 0.3% growth predicted for them. If their economies grow as quickly as China, so too will their energy consumption.

Forty years of growth at a very rapid pace leads to some staggering totals at the end of the period. the PWC paper says the Emerging 7 will have economies larger than the G7 by 2050. Pretty safe to say that their energy use will be larger as well.

Mexico

Mexico is expected to see its population rise from 112 million in 2010 to 135 million in 2030, and 153 million by 2050. Their GDP is expected to grow from $1 trillion in 2010 and, according to Goldman Sachs, this will reach $9 trillion by 2050.

In 2006, Mexico consumed 7.4 quads per year.

They will be richer than we Americans are today. They will have access to the fuel they both need and want.

If they then decide to use energy at the rate we are today (323 mbtus per person), the 153 million Mexicans will consume 49.4 quads per year. That’s a compound annual growth rate of 4.1% per year.

Turkey

Turkey’s population is forecast to rise from 73.7 million in 2010 to 93.7 million in 2030, and 86.4 million by 2050. Their GDP is expected to grow from $735 billion in 2010 to $5.3 trillion in 2050. Again, they will be rich enough to consume energy as profligately as Americans, should they so choose.

Turkey’s energy consumption was 4 quads in 2006. If they do choose to consume energy as Americans do today, they will burn 30 quads in 2050. That’s a 4.6% CAGR.

It’s all very well to note that Eastern Europe (and much of Western Europe as well) is going to experience population declines that may lower energy consumption, or at least growth in energy consumption. But the OECD now has dynamic and growing countries ranging from Chile and Australia to Turkey and Mexico.

To ascribe to the group as a whole a slow percentage growth is missing the picture.

One response to “The OECD Energy Conundrum

  1. Pingback: Part 2–American Energy Use in the 21st Century | 3000 Quads

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