Gasoline consumption in the country is expected to decline by 4-5% annually through the end of the decade
China’s EV market is thriving. Sales of fully electric and hybrid vehicles have tripled over the past three years, now nearly eight times higher than in 2020. It’s an exciting time for automakers selling electric vehicles, but not so much for oil industry executives.
Nearly one-fifth of the world’s oil production currently goes to China. The country has driven much of the industry’s growth since the early 2000s, as it has for the automotive and other sectors. However, analysts now believe that China’s increasing adoption of EVs will lead to a significant decline in gasoline demand, which makes up 25 percent of the nation’s oil consumption.
One brokerage firm told reporters it expects Chinese gasoline consumption to fall by 4 to 5 percent annually through the end of the decade. While a reduction in demand was always expected, the rapid rise of EVs in China means this drop is happening much sooner than anticipated.
Currently, one in ten cars on Chinese roads is electrified. At the current rate of sales, that number is expected to double by 2027 and could reach 100 percent by the 2040s, according to Anders Hove, a researcher at the Oxford Institute for Energy Studies, speaking to Bloomberg.
Such a shift would have a catastrophic effect on the oil industry, with Hove predicting that China’s oil demand for light vehicles could drop from its current 3.5 million barrels per day to just 1 million by 2040.
While this presents a major challenge for Big Oil, the industry can find some reassurance in the fact that other countries are much slower to phase out their combustion vehicles—EVs currently make up only 10 percent of car sales in the US. Additionally, in China, much of the growth in electrified vehicles has come from sales of plug-in hybrid electric vehicles (PHEVs), which still require some gasoline. However, the exact amount of gasoline they consume in real-world scenarios across China remains unclear and needs further study.
