Oil market finds it difficult to continue relying on China

China's oil demand is expected to peak soon, as the country shifts to renewable energy and economic growth slows.

"For the past 20 years, the oil market has been dependent on China. The world's second largest economy has been its mainstay. However, that story is coming to an end," said Fereidun Fesharaki, president of energy consultancy Facts Global Energy, at a recent energy conference.

He predicts that China's oil demand will peak in the next three to five years. "In the global oil market, we have to look to countries like India, or other economies that can boost demand," Fesharaki said.

Similarly, consultancy Wood Mackenzie also forecasts that China's oil demand will peak in 2027. After that, the figure will gradually decline.

“China will see a long-term decline in oil demand after 2027, as it actively pursues its energy transition and overall economic growth slows,” said Shiqing Xia, an oil consultant at Wood Mackenzie.

Workers at an oil field in Xinjiang (China). Photo: Reuters — Workers at an oil field in Xinjiang (China). Photo: *Reuters*

In 2020, China set a target of carbon neutrality by 2060. They said carbon emissions would decline after 2030.

Like Fesharaki, Xia expects India to fill the gap left by China, which is forecast to overtake China as the world’s fastest-growing oil demand country by the end of this decade.

“Except for China, oil demand from India and other emerging economies in Southeast Asia will continue to grow through 2040. Over the next two decades, the growth engine in Asia will be India and Southeast Asia,” she said.

India's economy grew 7.8% in the second quarter - the strongest in a year. The country is also forecast to be the world's third largest economy by 2030.

According to the International Energy Agency (IEA), coal still accounts for the largest share of China's energy mix, at 55%. Oil and other liquid fuels account for 19%. Clean fuels account for a smaller share.

“However, consumption of natural gas, nuclear power and renewable energy has increased gradually since 2001,” the IEA said in a report late last year.

However, not everyone agrees that China’s oil demand will peak anytime soon. Some analysts believe that peaking will take years, even decades.

"China has set a target of being carbon neutral by 2060. I think oil demand will start to decline a few years before that," said Yaw Yan Chong, director of LSEG Oil Research in Asia.

Yaw stressed that China's crude oil imports are mainly for diesel and gasoline, which will become less necessary due to the "explosion" of electric vehicles. As for electricity generation, he stressed that China "mainly uses coal and very little oil."

Bob McNally, president of Rapidan Energy Group, said that without significant breakthroughs in renewable energy technology, China will still need oil for the next 20-30 years. However, the growth rate of demand will slow down.

Ha Thu (according to CNBC)

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