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China's EV boom has prompted oil giant Sinopec to adjust its oil demand forecasts, saying peak domestic gasoline demand has already passed and it’s going to be downhill from here. If accurate, the repercussions will be global considering China has for long been the biggest growth market for refined oil products.
According to CNEV Post, Chinese new car buyers are now choosing "new energy vehicles" (battery-electric and plug-in hybrid cars) at a rate of 37.8%, up from just 5.4% in 2020.
Whereas Scandinavian countries like Norway (87.8%), Iceland (56.1%) and Sweden (56.1%) lead in terms of EV adoption, China still sells ~10x more EVs than all those three combined. Further, China has a lot more room for growth given its huge population and the fact that currently, less than 5% of cars on Chinese roads are NEVs.
Sinopec now forecasts that 2024 and beyond will see declining gasoline demand.
Other analysts have given less bearish oil demand growth projections, but still worrying nonetheless.
A couple of weeks ago, the International Energy Agency reported that global oil demand reached an all-time high of 103mn barrels a day in June. According to the global energy watchdog, robust demand was driven by better than expected economic growth in OECD countries, surging oil consumption in China, particularly for petrochemical production and strong summer air travel. The IEA has predicted that demand could hit another peak in August and remains on track to average 102.2mn b/d for the whole year, the highest ever annual level.
Bloomberg has predicted that global demand for road fuel will continue to grow for only four more years, with demand peaking in 2027 at 49 million barrels per day before entering terminal decline. According to Bloomberg, electric vehicles, ever-improving fuel efficiency and shared mobility are the oil sector’s biggest nemesis, with EVs expected to displace a staggering 20 million barrels per day in oil demand by 2040, up from 2 million barrels per day currently.
Bloomberg forecasts that demand for gasoline and diesel for road transport has already peaked in the U.S. and Europe, while demand in China is set to peak in 2024. Demand in other major consuming countries like India will go into a tailspin in the 2030s.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.