Key Points
- China’s gasoline demand is expected to peak as early as next year due to the rapid growth of the EV industry.
- The IEA now expects China’s gasoline demand to peak at about 3.7 million barrels per day (bpd) in 2024, bringing forward previous forecasts that demand would level off in 2025/2026.
- This change is being driven by the fact that sales of traditional fuel vehicles are stopping growing, while sales of NEVs (new energy vehicles) are increasing rapidly.
- Oil giants have been preparing for this change for the past several years. Sinopec, for example, has partnered with Nio and other EV makers to build charging and battery swap infrastructure.
- China’s NEV sales are expected to reach 9 million units this year, which is a significant milestone.
- The rise of EVs is having a major impact on the global oil market. As more and more people switch to electric vehicles, demand for gasoline and diesel is declining.
- Oil companies are responding to the rise of EVs by investing in new businesses, such as charging infrastructure and battery storage. They are also working to develop new technologies that will make EVs more affordable and convenient.
- The transition to a low-carbon economy is happening faster than many people expected. This is creating new opportunities for businesses and investors, but it is also posing challenges for governments and regulators.
Detail
China’s dependence on oil is declining due to the rapid growth of electric vehicles (EVs) in the country. The demand for gasoline is expected to peak as early as 2024, and some analysts even predict it to happen in 2023.
The International Energy Agency (IEA) has revised its forecasts and now expects China’s gasoline demand to peak at around 3.7 million barrels per day (bpd) in 2024. This indicates that the transition to electric vehicles is happening faster than previously anticipated.
Increasing popularity of EVs
The increasing popularity of EVs can be attributed to the rapid development of China’s EV industry. In the first half of the year, China sold 3.75 million New Energy Vehicles (NEVs), including plug-in hybrids and battery-electric vehicles, accounting for 28 percent of all vehicle sales.
To meet the growing demand for EVs, various oil giants in China, such as Sinopec, CNPC, and CNOOC, have been preparing for the shift by partnering with EV manufacturers like Nio and Rising Auto to build charging and battery swap infrastructure. These efforts indicate a proactive approach by the petrochemical industry to adapt to the changing landscape and accelerate the pace of transformation.
Transition to EVs
The transition to EVs not only reduces China’s dependence on oil but also has implications for global oil demand. Sinopec’s chairman, Ma Yongsheng, has stated that global oil demand is expected to peak by 2030, further supporting the notion that the world is moving towards cleaner and more sustainable energy solutions.
China stands to gain several benefits from the increasing adoption of electric vehicles (EVs) and the decline in oil dependence:
- Reduced air pollution: China has been grappling with severe air pollution in many of its cities, largely due to emissions from traditional internal combustion engine vehicles. As EVs produce zero tailpipe emissions, their widespread adoption can significantly improve air quality and public health.
- Energy security: By reducing its reliance on imported oil, China can enhance its energy security and reduce vulnerability to fluctuations in global oil prices or geopolitical tensions affecting oil-producing regions.
- Technological leadership: Embracing the EV industry allows China to position itself as a global leader in electric vehicle technology. As the world transitions towards cleaner transportation, China’s prowess in EV technology can give it a competitive edge in the global market.
- Job creation: The growth of the EV industry can create new job opportunities in manufacturing, research and development, infrastructure development (charging stations, battery swap stations), and related sectors.
- Climate change mitigation: As a major greenhouse gas emitter, China has a crucial role in combating climate change. Electrification of transportation can help reduce carbon emissions from the transportation sector, contributing to China’s efforts to meet its climate goals.
Benefits continue
- Urban planning and congestion reduction: The shift to EVs can prompt a rethinking of urban transportation, leading to improved public transportation, better city planning, and reduced traffic congestion.
- Technological innovation and knowledge transfer: Embracing EVs and clean energy technologies encourages domestic innovation and can attract international investments and expertise, promoting knowledge transfer and collaboration.
- Economic growth and export potential: As the EV market expands globally, China’s EV industry can experience significant growth, creating export opportunities for its products and technologies.
- Reduced healthcare costs: Improving air quality through EV adoption can lead to reduced healthcare costs associated with air pollution-related illnesses.
- Sustainable development: Integrating EVs into the energy mix aligns with China’s goals of promoting sustainable development and transitioning towards a greener economy.
China’s shift towards electric vehicles offers not only environmental benefits but also economic and strategic advantages that can position the country for a cleaner and more sustainable future.
Conclusion
China’s gasoline demand is expected to peak as early as next year due to the rapid growth of the EV industry. This is a significant change, and it suggests that China’s gasoline demand is likely to continue to decline in the years to come.
The rise of EVs is having a major impact on the global oil market, and oil companies are responding to this change by investing in new businesses and developing new technologies. The transition to a low-carbon economy is happening faster than many people expected, and this is creating new opportunities for businesses and investors. However, it is also posing challenges for governments and regulators.
