Oil markets’ decades-long dependence on China may be ending

China’s oil demand may peak by the end of this decade, and with its economic recovery still in limbo, can global oil markets continue to rely on China?

“For 20 years, the oil market has been dependent on China and China, and China, has been supporting the markets,” Feridun Vicharaki, president of Facts Global Energy, said at a recent energy conference. “The story is coming to an end.”

He expected China’s demand for oil to reach its peak during the next three to five years.

“In the world [oil] “In markets, we have to look to countries like India, or other empires to create flexibility on the demand side,” Ficharaki added.

Likewise, Wood Mackenzie expects Chinese oil demand to peak by 2027, after which an extended decline in crude oil demand will follow.

“Chinese oil demand will peak by 2027 and beyond [will turn] “The global economy is witnessing a long-term decline as the country actively pursues the energy transition… and with overall long-term economic growth slowing,” Xicheng Xia, an oil and chemicals consultant at Wood Mackenzie, told CNBC.

In 2020, China set goals to be carbon neutral by 2060 and said it would strive to reach peak carbon emissions by 2030.

Like Vicharaki, Shea expects India to offset China’s demand for crude oil.

The research director said that India is expected to overtake China as the largest center for oil demand growth towards the end of the decade.

“Outside China, overall oil demand is in India and other emerging economies in Southeast Asia [will] “It will continue to grow into the early 2040s,” she added.

“Over the next two decades, the engine of growth in Asia will be India and Southeast Asia,” she predicted.

The Indian economy grew by 7.8% in the quarter ended June, marking the fastest pace of growth in a year. The country is also widely expected to become the third largest economy by 2030.

According to the International Energy Agency, coal still constitutes the largest component of China’s energy mix at 55%. Petroleum and other liquids account for 19%, while clean burning fuels make up relatively smaller shares.

“However, consumption of natural gas, nuclear power and renewable energy has increased steadily between 2001,” the IEA noted in its late 2022 report.

Not everyone agrees that Chinese demand for oil will reach its peak soon. Some analysts believe the timeline will be more than a few years – perhaps even decades.

“China has a goal of reducing carbon emissions to zero by 2060, which is when I expect demand for crude oil to decline as it gradually moves towards that. [deadline]said Yao Yanzhong, director of oil research at LSEG in Asia.

Yao stressed that China’s crude oil imports are primarily refined into diesel and gasoline, which will become less important in China due to the “absolutely amazing” growth in electric vehicle adoption this year. As for power generation, he noted that China uses “mostly coal and very little oil.”

Similarly, another analyst believes that in the absence of any major technological innovation, oil demand in China will not stop over the next 20 to 30 years.

“In the absence of major gas discoveries or technological breakthroughs in renewable or alternative energy, we do not expect Chinese oil demand growth to end for at least another two or three decades, although the rate of demand growth may slow,” Bob McNally said. , Chairman of Rapidan Energy Group.