China’s Oil Demand Expected to Fall

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In 2017, China’s oil demand rose by 5.5 percent year-on-year and hit 11.77 million barrels per day, however, under policies centered around green development featuring energy efficiency and quality, China’s consumption of oil (gasoline and diesel included) is expected to see gradual fall for the next five to seven years.

Although gasoline and diesel are still dominant energy in transportation sector, the consumption growth has been slowing down over the past years. And this will continue to be the trend in next five to seven years, since China has been developing alternative and renewable fuels, and ethanol-based gasoline supply will also grow. This change in energy mix is in compliance with China’s shift from quantity to quality, focus on energy efficiency and environment protection.

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According to statistics released by S&P Global Platts China Oil Analytics, oil demand is estimated to grow by 4.2 percent year-on-year and hit 500,000 barrels per day in 2018. And a similar estimate is also made by Sinopec and China National Petroleum Corp that oil demand growth of about 5.5 percent in 2017 will fall down to more than 4 percent in 2018.

chinas oil demand - China’s Oil Demand Expected to Fall

Sinopec employees check natural gas equipment in Guangyuan, Sichuan province, in June. [Photo by Hu Qingming/for China Daily]

Wang Lu, an oil and gas analyst with Bloomberg Intelligence, credits the slowing growth to the surging number of alternative fuel cars, and bike-sharing industry is also playing a role here as it dents short-distance driving. Since it is China’s mandate to include at least 10 percent ethanol blend in energy mix by 2020, gasoline demand may see an increasingly fast fall in 2019 to 2020.

As to diesel demand, driven by the shift in China’s economic development from heavy industry to consumption and services sectors, industrial output growth slows down, which leads to a 2.7 percent reduction of diesel demand in the first six months of 2018.

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Application of liquefied natural gas (LNG) also contributes to the dampening demand for diesel. In 2017, the number of large LNG trucks hit a record high of 96, 000, almost 4.9 times the figure of 19,600 in 2016. Industry insiders estimate that there are still growth room for LNG-powered trucks, say, in the fields of logistics, public transportation and postal services. In some major industrial provinces and cities, like Hebei, Shandong and Tianjing, in order to alleviate pollution and increase energy efficiency, many ports have phased out diesel trucks and resort to railways to transport coal.

Retail prices of gasoline and diesel were raised in early August, both up by RMB 70 yuan ($10.2)/ metric ton. National Development and Reform Commission said it would keep an eye on existing pricing mechanism and make reasonable changes in response to actual situation in China and global oil market. And China’s oil giants, CNPC, CPCNOO(China Petrochemical and China National Offshore Oil) are required by government to ensure stable supply and fair pricing.

 

 

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