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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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China’s Petrol-Powered Car Ban Could Cripple The Oil Market

EV

China is joining the UK, France, and Norway in banning vehicles powered by fossil fuels.

If China, the world’s largest new vehicle market with sales of 28.03 million units last year, were to ban gasoline and diesel vehicles in the market, the impact on petroleum would be huge. But how pervasive is the fossil-fuel ban in global markets key to new vehicle sales and petroleum consumption?

During an automotive forum over the weekend in Tianjin, Xin Guobin, the vice minister of industry and information technology, said the government is working on a timetable to end production and sales of fossil-fuel powered vehicles.

The national government has been headed in this direction for a few years, issuing generous “new energy vehicle” subsidies to automakers to build electric vehicles and for consumers to buy them. The subsidies are being cut back this year and the government is expected to adopt a zero-emission vehicle mandate similar to California’s where automakers would be mandated to manufacture a set percentage of electric and fuel cell vehicles in the short term.

China is open to direction from other countries as it deals with increasingly crowded cities, booming auto sales, and air pollution in growing metro areas. The country had already committed to cap its carbon emissions by 2030. Related: World’s Largest Car Market Turns To Electric Vehicles

European nations are dealing with backlash from the Volkswagen diesel emissions cheating scandal that started two years ago, with more investigation and pressure coming from nations and the European Union. Diesel-powered cars make up about half the market in Europe with consumers looking for alternatives since the scandal broke. Strict carbon emissions policies are also leading toward banning fossil-fuel powered vehicles.

German chancellor Angela Merkel has suggested that Germany may follow its European neighbors on the fossil-fuel vehicle ban. Seeking her fourth term as chancellor in the Sept. 24 election, Merkel has been facing criticism from her opponent for being too tied to German automakers to enforce strict emissions policies. The German government has become tougher, investigating several automakers since the VW scandal broke in 2015.

A new think piece by a Bloomberg columnist sees the impact of China’s expected decision to have a huge impact on the sale of new vehicles and petroleum in the future.

A chart shows that nearly 80 percent of the global auto market is pushing toward a phase-out of petroleum cars and adoption of electric vehicles. If that comes to be, demand for gasoline and diesel would drop dramatically.

However, there are few major hurdles that must be crossed before this will come anywhere near adoption on a mass scale.

One of them is that the U.S., the world’s largest economy ahead of China, may see its fuel economy and emissions targets softened soon by the federal government. Soon after taking over the White House this year, President Donald Trump announced he would be reconsidering the Obama administration’s mandates over the next year. White House comments indicate the rules will be lightened up.

Trump’s June 1 decision to leave the Paris climate accord also suggests that the federal government is backing off the plan Obama negotiated with automakers a few years ago.

Japan is another country that has yet to ban fossil fuel vehicles. The government has been taking a more cautious approach, supporting efforts by Japanese automakers to embrace hydrogen fuel cell vehicles. But sales of these vehicles have been quite small so far. 

The chart shows that so far, Brazil, Canada, Russia, Mexico, and Italy have no significant plans in place toward banning fossil-fuel vehicles. These markets are dependent on oil production and overseas shipment, and may be less inclined to impact the industry through national fossil-fuel mandates.

Related: The North Sea Oil Recovery Is Dead In The Water

India has tentative phase-out plans. If the government does issue a mandate, it will have a major impact on the nation that’s expected to soon surpass China in population and that has been seeing new vehicle sales grow in recent years.

For now, the odds are against governments wanting to see fossil-fuel vehicles disappear. Bloomberg New Energy Finance reports that last year, there were about 695,000 electric vehicles sold versus 84 million new vehicles sold worldwide. There are about a billion petroleum-powered vehicles owned around the world. Getting rid of them will take quite a while.

By Jon LeSage for Oilprice.com

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  • Kr55 on September 12 2017 said:
    Don't need to panic about EV's yet. They will be hitting a wall in terms of world resources for batteries soon.

    The big and quick win for all countries trying to reduce emissions is phasing coal out and using nat gas for power generation. Incremental gains by doing other replacements will take decades still.
  • Brandon on September 12 2017 said:
    Weak governments have nothing better to do that trying to destabilize markets. But oil price is inevitably on the rise. And how does China plan to power electric cars? State men will never be able to provide true solutions to actual problems. They only use slogans to try and keep their power alive.
  • Bill Simpson on September 12 2017 said:
    Better hope they do go electric because if the oil supply declines before oil demand does, the economy will be forced to shrink. It's physics. With today's record level of debt, a constantly shrinking economy causes by lack of fuel, will collapse the financial system.
    I don't hold out a lot of hope it can be avoided now.
  • Jhm on September 12 2017 said:
    Nothing to worry about here. These targets are far enough out (2040) that EVs would have already displaced 99% of ICE vehicles even without these laws. The only difference that these laws make is that they force automakers and oil producers to wake up from their collective denial.

    EV penetration will reach 80% by 2030 with or without these regulations.
  • Gary Spencer on September 13 2017 said:
    About time car users had some lower prices on petrol and diesel and these announcements on EV's should do it but then again stock brokers are not predictable animals and act illogically in the light of reality itself so god knows what will happen, they will probably start buying stocks of oil instead when they should be selling.
  • Timmie Tee on September 14 2017 said:
    So these govs banning ICE are telling anyone wanting to go on a 400 mile trip you will in the future have to stop your vehicle halfway and charge it for 6 hours to make it to your final destination? Oh, and try that in a hurricane or earthquake. Haha, I'm keeping my ICE until they pry my cold dead fingers off the steering wheel. The majority of consumers will too and if new ICE cars are banned, it will create a huge spike in the price of used ones.

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