JUN 6, 2018
Population demographics in the developed world paint a grim economic picture. Rapidly aging populations and plummeting birth rates mean drastic declines in productive population and a commensurate drop in energy consumption.
Fortunately (or unfortunately, depending on your viewpoint), we know what happens when this occurs over a longer time horizon, as it has already happened in Japan. You end up with an economy that is dead in the water for decades at a time and a central bank that has to resort to ever-more-desperate means to prop everything up.
Japan has a 20-year head start on China, for example. And while Japan was once heralded as the next world economic superpower, it was done in by simple demographic math. Much as China will be done in by the same basic forces of productive supply and demand.
To see the future, sometimes you have to look to the past. Japan is patient zero in the global epidemic of slowing growth and although Japan was assumed to be the emerging world power in the '80's, we now know better. The title of emergent power now rests with China...and for the same reasons it didn't work out for Japan, it won't work out for China.
The Japanese 15 to 60 year old population peaked in 1993 and declined over 15% by 2018. The core population will continue falling, down 24% by 2030, and 34% by 2040. Energy consumption growth began stalling in 1997, consumption peaked in 2006, and has declined 17% from the '06 peak through 2015. However, the EIA estimates the falls seen since '06 will cease shortly and energy consumption will stabilize through 2040.
Below, the actual data as above versus the EIA IEO'17 forecast. While the core population will fall at an even faster rate, the EIA forecasts energy consumption will stabilize (against all logical rationale)?!?
The Chinese 15 to 60 year old population peaked in 2011 and has fallen 2% as of 2018 but will be 10% smaller by 2030 and 16% smaller by 2040. The EIA assumes energy consumption will continue to rise (and be 44% higher by 2040) despite the clear cases in Japan, Europe, and elsewhere that energy consumption tracks the core population...down.
And perhaps the strangest forecast of all...Western Europe. The declining core population and energy consumption inexplicably turn and begin rising...because?!?
ORIGINAL SOURCE: What Patient Zero, Japan, Can Tell Us About China & The Developed World At Large by Chris Hamilton at Economica on 6/3/18