China’s EV Boom Threatens to Push Gasoline Demand Off the Cliff

(Bloomberg) — From Tesla chargers in the ancient alleyways around the Forbidden City in Beijing to highways lined with charging stations in the western desert, signs of China’s fleet electrification — and gasoline depletion — are everywhere.

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Chinese sales of electric cars and hybrids have reached the final stage this year in their tug-of-war with internal combustion engines. They accounted for more than half of all passenger car sales in the four months from July, according to the China Passenger Car Association, a trend that is poised to send demand for fuel into a slump that will have a major impact on oil prices. market.

The faster-than-expected take-up of EVs has changed the outlook among fuel forecasters at energy giants, banks and academics in recent months. In contrast to the US and Europe – where higher consumption has been followed by long periods – the decline in demand for the world’s top crude exporters is expected to be more pronounced. Brokerage CITIC Futures Co. sees Chinese gasoline consumption falling by 4% to 5% annually through 2030.

“The future is coming fast in China,” said Ciaran Healy, an oil analyst at the International Energy Agency in Paris. “What we’re seeing now is a medium-term outlook coming to the forefront of the agenda, and it has to do with the Chinese situation and the growth of global demand over the next 10 years.”

For the global oil market, which has come to rely on China as its main driver of growth this century, that affects the main pillar of consumption. The country accounts for one-fifth of the world’s oil demand, and gasoline accounts for one-quarter of that. Expectations for a sharp drop from transportation are also coming on top of declining industrial spending due to the economic downturn.

The growing popularity of electric trucks, as well as those that run on liquid gas, is also weighing on diesel demand. Chinese oil consumption peaked in 2019 and will fall by 3% to 5% annually through 2030, UBS Securities Co said in a note this month.

There are still many unknowns about whether China will adopt EVs, whether full electric power will ever be achieved, and what that means for oil demand. Another question mark surrounds plug-in hybrid cars, which can be powered by electricity or a back-up petrol engine. They have calculated the growth of sales in the last few years, but there is little data on whether the drivers of these cars still rely on motor oil.

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