As the world’s largest oil importer and a pivotal player in global energy markets, China has long been the engine driving oil demand growth. However, a recent forecast from the China National Petroleum Corporation (CNPC) suggests that 2023 may mark the peak of the country’s refined oil consumption, with profound implications for global energy markets and the energy transition.
According to the CNPC Economics & Technology Research Institute, China’s refined oil consumption hit a record high of 399 million metric tons in 2023, equivalent to 7.98 million barrels per day. This milestone, however, is expected to be short-lived. CNPC projects a 1.3% decline in consumption to 394 million tons in 2024, signaling the beginning of a sustained downturn.
By 2035, China’s refined oil consumption is forecast to drop by as much as 25-40%, leveling off between 240 and 290 million tons annually. This steep decline is attributed to rapid advancements in electrification, alternative fuels, and shifting economic priorities.
One of the primary drivers behind the decline is China’s aggressive push towards electrification. CNPC predicts that by 2035, half of China’s car fleet will be electric vehicles. This seismic shift is expected to reduce gasoline consumption by 35-50%, falling to between 80 and 100 million tons annually. Similarly, the rise of alternative-fuel trucks powered by electricity, liquefied natural gas, and hydrogen will cut diesel demand by an estimated 35-50%, dropping to 100-120 million tons by 2035.
Additionally, while fuel consumption for transportation declines, oil-based chemical feedstocks such as naphtha and liquefied petroleum gas are emerging as critical growth drivers. Demand for these feedstocks, essential in producing plastics and other petrochemicals, is expected to increase by 55%, reaching 210 million tons annually by 2035.
One outlier in the overall decline is jet fuel consumption, which CNPC expects to rise by 70% to 60.8 million tons by 2035. This increase reflects growing demand for air travel, particularly as China’s middle class expands and tourism rebounds post-pandemic.
Implications for Global Oil Markets
CNPC’s forecast suggests that China’s crude oil imports, which currently account for 25% of global imports, are set to peak next year. This marks a significant shift after decades of steady growth, potentially easing upward pressure on global oil prices.
Lower oil demand in China could also paradoxically delay peak oil demand globally. As Rory Johnston, an energy analyst, noted in a recent discussion, “Slower (or finished) Chinese demand growth will mean lower prices, which weakens a key pillar of EV transition appeal.” Cheaper oil could reduce the economic incentives for adopting renewable energy and electric vehicles in other parts of the world.
China’s dominance in EV production is also reshaping global markets. Affordable Chinese-made EVs are poised to accelerate the transition in lower-income regions where cost barriers remain a significant hurdle. However, protectionist policies in OECD countries aimed at defending established automakers could complicate this trajectory.
Despite CNPC’s projections, some experts caution against declaring 2023 as the definitive peak. Critics point to the sluggish state of China’s economy as a confounding factor.
“Should ‘peak’ China demand prognostications really be made when the Chinese economy is in the dumps?” asked one commentator. Economic recovery could temporarily reinvigorate oil demand, making it premature to draw firm conclusions.
However, China, long known for its voracious oil consumption and burgeoning electric vehicle market, is seeming to be reclaiming attention as a major oil producer with a recent surge in domestic output. This resurgence comes after years of decline and poses significant implications for global oil dynamics.
Through substantial investments via its state-owned energy giants—China National Petroleum Corp., China Petroleum & Chemical Corp., and Cnooc Ltd.—Beijing has successfully reversed the downward trend in domestic oil production that began in 2015. This year, Chinese petroleum output has soared to nearly all-time highs, reaching approximately 4.3 million barrels per day.
From its lowest point in 2018 to the peak in 2023, China has added over 600,000 barrels per day of additional production—surpassing the daily output of some OPEC+ nations. Currently, China ranks as the world’s fifth-largest oil producer, trailing only behind the US, Saudi Arabia, Russia, and Canada, and surpassing Iraq.
Information for this briefing was found via Reuters and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
