China's extremely rapid adoption of EVs has forced oil giant Sinopec to adjust its forecasts, saying peak domestic gasoline demand has already passed and it's all downhill from here. The repercussions will be global; China has been the biggest growth market for refined oil products for more than 20 years.
According to CNEV Post, Chinese new car buyers are now choosing "new energy vehicles" (NEVs, meaning battery-electric and plug-in hybrid cars) at a rate of 37.8%, a percentage which has rocketed up from 30.0% in 2022, 15.5% in 2021 and just 5.4% in 2020.
While Scandinavian countries like Norway (87.8%), Iceland (56.1%) and Sweden (56.1%) led the world for EV adoption in 2022, China sells somewhere around 10 times more EVs than all those three combined, and there's a lot more room for growth in the world's second-most populous country, since as of 2022, less than 5% of cars on Chinese roads were NEVs.
So China's largest oil company Sinopec is already seeing a drop in demand, from which it doesn't expect to recover. Previous predictions placed peak demand somewhere in 2025, but at a conference in Zhengzhou in August, Bloomberg reported that one Zhou Yan, from Sinpoec's retail sales division, said EVs were already displacing some 15 million tons of Chinese oil product sales in 2023, and that the company is forecasting that 2024 and subsequent years will see declining demand.
According to the International Energy Agency, Chinese demand accounted for more than 70% of global oil market growth in 2023, so while global oil product sales are at record highs of around 102.2 million barrels per day in 2023 (up around 2.2 million barrels per day over figures from 2022), and gasoline for passenger cars is only a percentage of total oil product demand, it'll be interesting to see how China's rapid EV uptake affects predictions for global peak oil demand.
The IEA released its forecast in June, estimating that peak global oil use for transport will arrive around 2026, but strong demand from the petrochemical and aviation sectors would continue to support overall market growth, albeit at slower rates, at least as far out as 2028.
A global oil demand peak, then, could arrive before the end of the decade. And unexpectedly rapid transitions to cleaner vehicles like what we're seeing in China, as well as continued increases in fuel economy for new fossil burners, could bring that date closer.
From Bloomberg
Fuel demand in two and three-wheeled vehicles is already in structural decline, with BNEF estimating that 70% of total kilometers traveled by these vehicles already switched over to electric. Fuel demand for cars will be the next to turn, since well over 5% of the passenger-vehicle fleet is now either battery-electric or plug-in hybrid. The internal combustion vehicle fleet is also becoming more efficient due to rising fuel-economy targets.
Diesel demand for heavier vehicles will keep growing for a bit longer, but even there a seismic shift is underway. Electric, fuel cell and battery-swapping options have quickly climbed to 12% of light commercial vehicle sales and 4% to 5% of medium and heavy commercial vehicle sales. That heavy-duty figure is likely to climb to over 10% by 2025.
Combine all those segments, and BNEF expects total oil demand for road transport in China to peak late next year. Demand won’t drop off a cliff anytime soon — fleet turnover in the trucking segment in particular will take time — but it still marks a major shift for global oil demand patterns. It also has big implications for refiners that need to quickly adjust the mix of products they produce.
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