"A cup of rice in your own hands": how China has changed the oil market

The development of the Chinese economy for about 20 years was one of the main factors that ensured the growth of oil consumption in the world. But now China's role has changed: it is becoming a leader in reducing its consumption and limiting its purchases, thereby increasing risks for oil exporting countries. This is changing the situation in the entire global oil industry.

In the 2010s, China's oil demand grew by an average of 6% annually. In 2015-2024, the country accounted for 60% of the increase in its consumption in the world, or about 6 million barrels per day, but now it has almost ceased to play the role of a locomotive in the global oil market, notes the International Energy Agency (IEA).

The Chinese economy is fundamentally changing. A period of unprecedented construction of factories, real estate and infrastructure is over. The country's previously wealthy population was buying up cars, creating an ever-increasing demand for fuel. But now the Chinese are rapidly moving to electric cars, as the country has become a world leader in their development and production.

"The picture through 2030 looks very different [than through 2024]. Due to extraordinary growth in sales of electric vehicles, continued adoption of gas-powered trucks, rapid development of high-speed rail networks, and structural shifts in China's economy, its oil demand will peak as early as this decade," the agency said in its June report on the oil market outlook through 2030.

Over the past year, the IEA has radically revised its expectations. In June 2024, it predicted that China's average daily consumption in that year would amount to 17.1 million barrels, and by 2029-2030 it would grow by another 1 million barrels to 18.1 million. But even last year's forecast did not come true. By the end of 2024, Chinese demand totaled 16.6 million barrels, accounting for just 20% of global growth. By the end of the decade, as the IEA now expects, demand will remain virtually unchanged, amounting to 16.7 million in 2030. The peak of 16.9 million barrels it will reach in 2026-2028, after which consumption will begin to decline, the agency believes.

Not all forecasts are so pessimistic. OPEC, for example, expects Chinese consumption to still increase by almost 2 million bpd by 2050, although most of the growth will occur in the next decade, with a peak in 2035. But the cartel also recognizes that China is no longer the main driver of global demand due to "slower economic growth, the faster spread of electric vehicles and charging infrastructure, and the continued substitution of oil in a number of sectors."

The estimates of Chinese companies are close to the IEA forecasts, if not more radical. If the agency expects this year's demand at the level of 16.7 million barrels, then, according to the December forecast of China National Petroleum Corporation (CNPC), it will amount to 770 million tons, or only about 16 million barrels per day (in terms of Brent). Consumption will decline after this year, CNPC said, with Wu Muyuan, vice president of the company's analytical institute, predicting as early as February 2024 that oil demand would not peak until 2030.

State-owned oil refiner Sinopec said in its annual December forecast that due to weakening demand for diesel and gasoline, China's oil consumption will peak in 2027, but imports will peak as early as 2025.

20 years ago, China was buying just 3 million bpd abroad, and in 2013 overtook the United States in purchases to become the world's largest oil importer. But in 2024, imports fell for the first time in two decades (excluding the covid pandemic), according to Chinese customs data: the country bought 11.04 million bpd, or 1.9% less than a year earlier. Imports rose slightly in 2025, in part because companies are building up inventories, taking advantage of lower global prices.

A key driver of the turnaround has been the large-scale and accelerated adoption of electric vehicles. Sales of all-electric cars and plug-in hybrids soared nearly 40% in 2024, accounting for about half of all new car sales in the country (6% in 2020) and two-thirds globally, notes the IEA. This trend is accelerating thanks to:

- government support ( estimated by the Washington-based Center for Strategic and International Studies at nearly $231 billion between 2009 and 2023, including $117.7 billion in the form of a 10 percent sales tax exemption);

- fierce competition (already in 2018, there were almost 500 companies developing electric vehicles in the country);

- the sheer number of models and manufacturers' aggressive pricing policies that make electric cars more affordable (between 2023 and 2024, prices for hybrids drop 27 percent and battery-only cars drop 21 percent, according to the Autohome Research Institute);

- technological breakthroughs (CATL, the world's largest battery maker, and BYD, which last year overtook Tesla in global electric car sales, claim they can now charge batteries in five minutes to run 500 and 400 kilometers, respectively);

- the development of charging infrastructure (in May, there were more than 14 million charging stations nationwide - nine times as many as at the end of 2020, notes The Wall Street Journal).

In 2030, the IEA predicts that 80% of all new cars sold in China will be electric (versus 60% in Europe and just 20% in the US).

And now China, unlike in previous decades, will lead the way in reducing oil consumption: it will account for about half of the 5.4 million barrels per day that will be saved by 2030 through a shift to electric vehicles.

The peak of diesel and gasoline consumption in China has already passed. From a peak of 3.8 million bpd in 2021, gasoline demand will fall to 2.5 million by the end of the decade, declining at an average annual rate of 6%, the IEA expects. Demand for diesel will decline by 2.1% annually, mainly due to problems in the construction sector, which involves a lot of equipment running on this fuel (the real estate market is in its fifth year of crisis plus the infrastructure boom has ended), as well as the spread of gas-powered trucks (almost a third of sales in 2024).

The expansion of high-speed railroads plays an important role in the decline in demand for petroleum products: their network in China, already the largest in the world, will expand by 20% by 2030, reaching 60,000 km. It replaces domestic air travel, curbing the growth of kerosene consumption - it will continue to increase, but mainly at the expense of international flights, the IEA believes.

Finally, the economic slowdown is also playing its part: while the average annual GDP growth rate in the 2010s was 7.3%, it may fall to 3.7% by the end of the decade. China may face years of stagnation.

The only source of growth in the sector remains petrochemicals, the IEA points out: by the end of the decade, they will provide an additional 1.1 million bpd of demand - as much as will be taken out of the market by lower gasoline consumption.

Electrification of transportation and economic change are not the only factors that the world's oil suppliers need to worry about. (And they already are: what's happening in China raises "questions for the long-term prospects of Russia's [fossil fuel] exports from pursuing active climate policies, including in friendly countries," the Bank of Russia's Research and Forecasting Department wrote in Fall 2024 in "China's Energy Transition Constrains Oil Demand.")

For more than a decade, Beijing has been deliberately strengthening energy security, and electrification of transportation and the rapid development of renewable energy are part of this policy. The development of its own oil production also fits into it. From 2018 to 2024, it grew by 13% in China to about 4.3 million bpd, the WSJ notes. Last year, state-owned PetroChina reported capital investments of $38 billion, almost as much as the U.S. Exxon Mobil and Chevron combined.

After the collapse of global oil prices in 2014-2016, Chinese state-owned companies preferred to import cheap oil rather than invest in developing their own fields. But in July 2018, Chinese President Xi Jinping personally ordered them to develop production.

CNOOC, a state-owned company specializing in offshore development, told WSJ that it intends to increase total production by 15% in 2024-2027 and two-thirds of this volume will be produced in China. In Ma, CNPC completed drilling an exploration well about 11 kilometers deep: Chinese television called it the second deepest vertical well in the world (the first place is occupied by the 12,262-meter-deep Kola well, which Soviet scientists drilled from 1970 to 1990).

"We must hold the energy rice bowl in our own hands," the WSJ quoted Xi Jinping as saying.

China is increasingly joining the ranks of "electric states," building industrial capabilities in electric vehicles, renewable energy, batteries and green technology exports, according to Benjamin Bradlow of Princeton University. "Electric states," he writes in a column in the Financial Times, control key nodes in emerging green technology supply chains.

Meanwhile, "carbon states" remain dependent on the volatility of the fossil fuel market. Bradlow includes Russia, for example. And the IEA partially includes the United States. The decline in gasoline prices and the spread of electric cars (the latter being fought by Donald Trump's administration) have forced the agency to raise its estimate of U.S. oil demand by 2030 by 1.1 million barrels compared to last year's forecast - about the same amount by which it lowered its estimate for China.

This article was AI-translated and verified by a human editor