(Bloomberg) — From Tesla chargers in the ancient alleys around Beijing’s Forbidden City to lonely highway rest stops with charging stations in the western deserts, signs of the electrification of China’s transportation fleet — and the demise of gasoline — are everywhere.
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Chinese sales of electric vehicles and hybrids have reached a tipping point this year in their tug-of-war with combustion engines. According to the China Passenger Car Association, they have been responsible for more than half of retail passenger car sales in the four months from July, a trend that is poised to reduce demand for transportation fuels, which will have a major impact have on oil production. market.
The faster-than-expected introduction of electric cars has changed views among oil forecasters at energy companies, banks and academics in recent months. Unlike the US and Europe – where peaks in consumption were followed by long plateaus – the decline in demand is expected to be greater in the world’s largest crude oil importer. Brokerage CITIC Futures Co. expects Chinese gasoline consumption to decline by 4% to 5% per year until 2030.
“The future is coming faster in China,” said Ciaran Healy, an oil analyst at the International Energy Agency in Paris. “What we are seeing now is that medium-term expectations are coming true ahead of schedule, and that has implications for the shape of Chinese and global demand growth over the rest of the decade.”
For a global oil market that has become dependent on China as its main growth engine for most of this century, this will erode a key pillar of consumption. The country accounts for almost a fifth of global oil demand, and gasoline makes up about a quarter of that. The prospect of a sharp decline in the transport sector also comes on top of tepid industrial consumption due to slowing economic growth.
The growing popularity of electric trucks, but also of trucks that run on liquefied natural gas, is also weighing on the demand for diesel. China’s consumption of the fuel peaked in 2019 and will decline 3% to 5% annually through 2030, UBS Securities Co. said. this month in a note.
There are still many uncertainties about how China’s EV rollout will progress, such as whether full electrification can ever be achieved, and what that will mean for fuel demand. Another question mark concerns plug-in hybrid vehicles, which can be powered by electricity or backup gasoline engines. They are responsible for much of the sales growth in recent years, but there is little data on the extent to which drivers of these cars are still dependent on motor fuel.