China's Oil Demand Set to Peak by 2025 Amid Transport Shift
Beijing, Tuesday, 10 December 2024.
China’s oil demand is expected to peak by 2025 due to the rapid adoption of electric vehicles, significantly impacting global oil markets.
Historic Shift in Energy Consumption
According to a groundbreaking report from China National Petroleum Corp (CNPC), China’s oil demand is projected to reach its zenith at 770 million tons in 2025, followed by a gradual decline to 240 million tons by 2060 [1]. This forecast represents a significant acceleration in the timeline, as earlier projections had suggested a peak wouldn’t occur until 2030 [1]. The shift is particularly noteworthy as China’s gas imports have simultaneously reached record levels of 121 million tonnes in the first eleven months of 2024 [6], indicating a broader transformation in the country’s energy landscape.
Electric Vehicle Revolution
A primary driver of this accelerated peak is China’s remarkable progress in new energy vehicle adoption, with sales surging 50% year-over-year as of December 2024 [6]. This transition in the transportation sector is occurring against the backdrop of China’s pledge to implement more accommodative fiscal and monetary policies for 2025 [5], potentially further accelerating the shift away from traditional fossil fuels. The S&P Global projects that China’s oil demand may increase by just 1.7% to 17.59 million barrels per day in 2025 [5], reflecting the moderating effect of this transportation revolution.
Global Market Implications
The implications for global oil markets are significant, especially considering current market dynamics. Oil prices have remained remarkably stable between $70 to $90 per barrel despite regional tensions [2], with recent trading showing Brent crude at $72.14 a barrel [3]. This stability persists even as OPEC+ has postponed its plan to unwind joint output cuts until the end of 2026 [5], suggesting that markets are already pricing in expectations of moderating Chinese demand. Fund managers have responded by boosting their net position to 157 million barrels, the highest since early October 2024 [6], indicating growing confidence in this structural shift.
Economic Transition Challenges
However, this transition faces some headwinds. Recent data shows China’s exports rose by 6.7% while imports fell by 3.9% in November 2023, both falling short of economists’ expectations [5]. The IMF projects China’s economic growth to slow from 5.2% in 2023 to 4.8% in 2024 and 4.5% in 2025 [2], suggesting that managing this energy transition while maintaining economic growth will require careful policy calibration. Despite these challenges, China’s commitment to reducing oil dependency appears firm, as evidenced by continued investment in alternative energy infrastructure and transportation systems [GPT].