China's Road Fuel Demand Has Turned Down Early. Petrochemicals, Not Cars and Trucks, Now Carry Its Oil Growth
For two decades, the single most reliable source of growth in world oil demand was China's appetite for gasoline and diesel. That era is ending sooner than most forecasters expected. In August 2024, Chinese gasoline consumption averaged an estimated 3.2 million barrels a day, 14 per cent less than in August 2023, according to the US Energy Information Administration, and the decline continued in September and October. Diesel turned first. In June 2024, consumption was an estimated 3.9 million barrels a day, 11 per cent below June 2023 and the largest year-on-year fall for any month since July 2021.
The lockdown era ended in late 2022, and 2023 set new highs for both fuels. The EIA identifies three causes for weaker gasoline demand: rising sales of battery electric and hybrid vehicles, a declining population, and slower economic growth. Combined sales of hybrids, plug-in hybrids and battery electric vehicles exceeded half of all passenger vehicle sales in China in October 2024, according to Bloomberg data cited by the EIA, up from 40 per cent a year earlier.
A single year of high electric vehicle sales changes only a small share of the fleet. The EIA cites an Oxford Economics forecast of 4.1 per cent GDP growth for China in 2025, against an average of 6.7 per cent from 2015 to 2019. It began in the second quarter of 2024, after consumption reached an all-time high in 2023. According to BloombergNEF data cited by the EIA, LNG trucks made up around 20 per cent of total truck sales from the third quarter of 2023 through March 2024.
A truck bought to run on LNG will burn LNG for the rest of its working life, typically many years, so each quarter of strong LNG truck sales removes diesel demand well into the future. If road fuels are no longer growing, where does Chinese oil demand growth come from? China accounted for a large share of global oil demand growth for most of the 2000s and 2010s. For oil exporters, especially those in the Gulf that sell heavily to China, the signal is clear. For Chinese policy, the decline in fuel demand is a vindication of years of support for electric vehicles.