With China’s economic recovery still in flux, can the world’s oil markets still rely on China as its oil consumption peaks by the end of the decade?
“For 20 years, China, China, China’s backing of the markets has been essential to the oil market. The saga is coming to an end, declared Fereidun Fesharaki, chairman of Facts Global Energy, at a recent energy conference.
He anticipated that the peak in China’s oil consumption will occur within the next three to five years.
“We have to look at nations like India, or other empires, to create the resilience on the demand side in the global [oil] markets,” Fesharaki continued.
In a similar vein, Wood Mackenzie predicts that China’s oil demand would peak in 2027, followed by a prolonged decline in demand for crude.
According to Shiqing Xia, an oil and chemicals expert at Wood Mackenzie, “China’s oil demand peaks by 2027 and then [turns] to a long-term decline as the country actively pursues energy transition… and as the general economic growth slows down in the longer term.”
China declared its intention to reach its peak carbon emissions by 2030 and set goals to become carbon neutral by the year 2060.
Like Fesharaki, Xia expects India to make up for China’s oil consumption.
Towards the end of the decade, the research director predicted that India would surpass China as the country with the biggest growth in oil demand.
“Outside of China, overall oil demand [will] continue to grow through the early 2040s,” she continued, referring to Southeast Asia’s other growing economies including India.
“India and Southeast Asia will be Asia’s growth engine for the next two decades,” she said.
India’s GDP expanded at its quickest rate in a year in the quarter ending in June, 7.8%. By 2030, it is anticipated that the nation would have the third-largest economy in the world.
The International Energy Authority estimates that coal still makes up 55% of China’s energy mix. 19% of all liquids are made up of petroleum, whereas smaller amounts of cleaner-burning fuels are used.
The IEA said in the report published in late 2022 that “natural gas, nuclear power, and renewable energy consumption steadily increased between 2001.”
Maybe a few decades from now?
There is disagreement on the timing of China’s oil demand peak. According to some analysts, the timescale will likely last for many years, if not decades.
“China has a net-zero carbon emission goal by 2060, which is by when I expect its crude demand to ease as it gradually heads towards that [deadline],” said Yaw Yan Chong, the director of LSEG Oil Research in Asia.
Yaw emphasised that due to the “quite explosive” development in EV adoption this year, China’s crude oil imports, which are mostly converted into diesel and petrol, will become less necessary in China. He stated that China uses “mostly coal and very little oil” for the generation of electricity.
Another analyst believes that China’s oil demand will continue for the next 20 to 30 years in the absence of a big technological advance.
“We do not expect China’s demand growth for oil to come to an end for at least another two to three decades, though the rate of demand growth may slow,” said Bob McNally, president of Rapidan Energy Group. “Short of major gas discoveries or technology breakthroughs in renewable or alternative energy.”