China and India: Growing Energy Demand and Implications for the World

Abstract

Economist's Corner - Implications of exploding energy demand in China and India. Sustained rapid economic growth has made China and India increasingly important in the world economy. The accompanying surge in energy demand from these two countries caught the world's attention only recently, as money-of-the-day oil prices broke record after record over the last couple of years. Some blame energy demand growth in China and India for the recent rise in oil prices, and some fear that a seemingly insatiable appetite for energy in these two countries will dry up world energy resources and threaten the way of life in Western countries. Indeed, energy demand has been growing fast in these two countries as their economies expanded rapidly. China and India together accounted for approximately 40% of the increase in world energy demand over the last 10 years and more than half in the last 5 years (Fig. 1). Between the two, China has taken the lion's share of energy demand growth so far. China alone accounted for 45% of the world's energy consumption growth and one-third of the increase in world oil demand between 2001 and 2005, while India accounted for 5% and 4%, respectively.