Is China’s Dependence on Chinese Oil Coming to an End?
For decades, the global oil market has danced to the tune of one major player: China. The world’s most populous nation has been a pivotal force in shaping the dynamics of the oil industry. However, recent forecasts suggest China’s insatiable appetite for Chinese oil may be nearing its peak. We delve into this shift and explore the potential consequences for the global oil market.
China’s Oil Demand on the Decline
The voice of change in the oil market is growing louder. Prominent energy experts, like Fereidun Fesharaki of Facts Global Energy and analysts at Wood Mackenzie, predict that China’s oil demand will peak in the next few years. Fesharaki boldly asserts that “the story is coming to an end,” hinting at a significant turning point. Wood Mackenzie pins the potential peak around 2027, followed by a decline in crude oil demand.
This forecast is tied to China’s ambitious goals in the realm of environmental sustainability. In 2020, the nation announced its intention to achieve carbon neutrality by 2060, with an interim target of peak carbon emissions by 2030. These objectives necessitate a reduction in fossil fuel consumption, including oil.
India: The New Oil Demand Growth Center
As China’s refined oil demand enters a phase of plateauing and decline, another Asian giant is poised to take the lead. India, with its booming economy and a rapidly growing middle class, is set to become the largest oil demand growth centre by the end of this decade. According to industry experts, including Xia from Wood Mackenzie, India’s economy is expected to surge, becoming the third-largest in the world by 2030.
India’s growth story is not just about quantity but also quality. Cleaner energy sources are gradually replacing conventional ones. As China shifts its focus toward renewables and natural gas, India is expected to fill the void left by its neighbour’s declining oil consumption. This shift marks a significant transformation in the landscape of oil demand in Asia.
Divergent Views on China’s Oil Demand
While many experts predict China’s oil demand to wane in the coming years, not everyone agrees. Some, like Yaw Yan Chong of LSEG Oil Research in Asia, argue that China’s quest for pure oil will persist until it achieves its net-zero carbon emission goal by 2060. They point to the explosive growth in electric vehicle (EV) adoption, which could reduce the need for gasoline and diesel. Furthermore, in terms of power generation, China heavily relies on coal and only sparingly on oil.
Bob McNally, president of Rapidan Energy Group, shares a similar view, emphasizing that without significant breakthroughs in alternative energy sources or major gas discoveries, China’s demand for oil may persist for another few decades. Although the rate of growth might slow, the trajectory remains upward.
The dependence of global oil markets on China has been a defining feature for decades. However, as China’s pursuit of environmental sustainability gains momentum, its Chinese oil demand is expected to reach its zenith in the near future. This shift opens up opportunities for other emerging economies like India to become dominant players in the oil market. Nevertheless, the divergence of expert opinions highlights the uncertainty of this transition. Whether China’s oil demand will truly peak in the next few years or persist for decades remains a subject of debate. As the world watches these developments unfold, the future of global oil markets hangs in the balance.
