Resource investors, take note: By 2025, just 10 years from now, energy consumption in Asia will increase a whopping 31%. A whole two-thirds of that demand, driven largely by China and India, will be for fossil fuels, most notably coal.
That’s according to a new research piece by financial services group Macquarie, which writes that the estimated rise in fossil fuel demand is equivalent of “three times Saudi Arabia’s current (all-time-high) oil production.”
Macquarie’s research is in line with BP’s “Energy Outlook 2035,” released earlier this year, which predicts that more than half of the world’s energy consumption will come from China and India by the year 2035.
Many readers might approach this news with a healthy dose of skepticism. Haven’t we been told that fossil fuels are falling out of favor? Aren’t governments placing caps on coal use to appease environmentalists and climate change crusaders?
It’s true that coal demand in China has declined a huge 6% so far in 2015, the result of anti-air pollution laws that temporarily restricted not just coal use but also factory operations and the amount of driving you can do. Last month I shared a striking photo of a man cycling through Beijing, a brilliant blue sky overhead—something I’ve personally never seen in my 25 years of visiting the city. As most people know, Beijing is notorious for its noxious yellow haze, and the government has been pressured lately to act. In Shanghai, authorities plan to close and relocate 150 factories in preparation for the proposed Shanghai Disneyland, the thinking being that the “Happiest Place on Earth” must have clear blue skies.
I think we all agree that clean air is preferable to smog, but there needs to be a balanced approach to environmental policy that’s also business-friendly.
“Coal producers within China are definitely facing a consistent push by the government for clean energy,” says Xian Liang, portfolio manager of our China Region Fund (USCOX).
To get a better sense of the biblical quantity of raw materials China currently consumes, check out this infographic courtesy of Visual Capitalist.