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After decades of China leading global oil demand growth, experts forecast the country’s crude consumption will top out within this decade as economic shifts and the energy transition reshape its energy mix.
China’s voracious appetite for oil fueled global markets for over 20 years. But with the country’s economic recovery still uncertain and its decisive pivot towards renewable energy, China’s crude demand is projected to peak between 2027–2030 before going into long-term decline.
“For 20 years, the oil market is dependent on China, China, China, supporting the markets. The story is coming to an end,” said Fereidun Fesharaki, Chairman of Facts Global Energy, at a recent industry conference. He predicts China’s oil demand will crest within 3–5 years.
Similarly, a new report from Wood Mackenzie concurrs that China’s oil demand will peak by 2027 as the country pursues energy transition goals and GDP growth moderates. India and Southeast Asian nations will drive oil demand growth through the 2040s.
“China’s oil demand peaks by 2027 and thereafter [will turn] to a long-term decline as the country actively pursues energy transition…and as the general economic growth slows down in the longer term,” said Shiqing Xia, Oil and Chemicals Consultant at Wood Mackenzie.
“Outside of China, overall oil demand in India and other emerging economies in Southeast Asia [will] continue to grow through the early 2040s,” Xia added.
Pivoting Away From Oil
In 2020, China pledged to reach net-zero carbon emissions by 2060 and hit peak emissions by 2030. This seismic shift away from fossil fuels underpins forecasts of an impending demand peak.
Coal still dominates China’s energy mix at 55%, with oil accounting for just 19% along with natural gas, nuclear and renewables. But use of lower-carbon energy sources is rising steadily, per the International Energy Agency (IEA).
Electrifying transport will further erode oil’s share. EV adoption exploded in China this year as sales tripled from January-May and comprised 17% of new car sales, per EV Volumes.
“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, Director of LSEG Oil Research in Asia.
Oil is refined primarily into gasoline and diesel in China. Chong said EV growth will lessen the need for transport fuels, while coal satisfies most power generation needs.
When Will Demand Plateau?
Some experts believe it may take longer for China’s crude thirst to abate. Without major tech breakthroughs in renewables or discoveries of new gas reserves, growth could persist for 20–30 more years, says Bob McNally, President of Rapidan Energy Group.
“Short of major gas discoveries or technology breakthroughs in renewable or alternative energy, we do not expect China’s demand growth for oil coming to an end for at least another two to three decades,” McNally stated, though at a slower pace.
Others point to the wide time frame between China’s net-zero target in 2060 and expected demand peak in the late 2020s. Yaw says meaningful easing of oil consumption aligned with climate goals may not occur until 2050–60.
“I expect its crude demand to ease as it gradually heads towards that [2060 net-zero] deadline,” Yaw stated.
Oil Majors Look Beyond China
Regardless of peak timing, China’s outlook is reshaping investment strategies of oil majors and trading houses. They are increasingly focused on grabbing market share in emerging Asia as China’s import growth moderates.
India has been central, with oil majors like BP plc and TotalEnergies SE investing billions to expand retail fuel networks as the country’s energy needs balloon.
India’s oil demand is forecast to rise by 4–5 million barrels per day by 2040, surpassing China as the top growth market, per IEA. Its economy expanded 7.8% from April-June, the fastest in a year.
“For the next two decades, Asia’s growth engine will be India and Southeast Asia,” said WoodMac’s Xia.
Energy giants are also eyeing Indonesia, Malaysia, Vietnam and other rapidly growing Asian oil markets. Regionally, crude demand is seen growing steadily through the 2040s owing to rising living standards.
Hit To Oil Prices
China’s waning crude appetite could exert downward pressure on global oil prices as it curbs import growth. The country makes up 15% of world oil consumption and has been the main pillar for demand.
Some analysts believe China’s demand peak may coincide with stagnating consumption in the West as efficiencies improve, sparking a supply glut. The oil and gas industry is already grappling with chronic underinvestment.
“Global oil demand will begin an irreversible decline after China’s demand peaks in the 2030s,” Carbon Tracker said in a report. “Falling demand means lower prices, with significant implications for companies and countries.”
This prospect will force producers to slash supply forecasts and future capital spending if they hope to avoid a collapse in prices. Expect tense discussions on coordinating output cuts in the coming decade.
While China’s demand outlook has dimmed, its crude imports will remain formidable for years as refining capacity and strategic reserves expand. But with its economy slowing and energy priorities changing, China’s epic rise as the bastion of global oil markets is inexorably plateauing. The world will have to look elsewhere for the next engine of growth.