Peak oil: China’s crude demand set to fall as EV bets ease Hormuz fears
China now faces the challenge of persistent refining overcapacity as ongoing electrification slashes fuel demand, CNPC official says
China’s demand for crude oil is expected to peak in the coming years, a scenario set to further reshape the global energy market following the Strait of Hormuz crisis.
The shift was due to Beijing’s massive efforts to develop renewable energy while also revamping the country’s transport sector by becoming the world’s largest producer and user of electric vehicles.
China has been the biggest driver of global oil demand since the 2000s, but its demand will peak over the next five years as a result of the country’s electrification push, said Dai Jiaquan, chief economist of the CNPC Economics and Technology Research Institute, at an event in Hong Kong on Monday.
China now faced a different challenge at home: persistent refining overcapacity, said Dai. Domestic crude demand was estimated at 750 million to 800 million tonnes per year, compared with refining capacity of 900 million to 1 billion tonnes.
Disruptions in the Strait of Hormuz had reshaped global supply and demand this year, pushing the market from an expected surplus into a supply deficit.
“Domestic refining capacity is undoubtedly excessive,” he said.
Instead of further expanding fuel production, China should accelerate the development of higher-value petrochemical products, particularly advanced materials, while reducing inefficient refining capacity, he said.
Dai added that older plants with limited potential to upgrade should gradually exit the market or be converted to produce sustainable aviation fuel, e-fuels or other emerging energy products.
The broader transition does not signal declining energy consumption. China’s primary energy demand was projected to peak at about 5 billion tonnes of oil equivalent by 2035, around 20 per cent higher than in 2025, before remaining above 4.5 billion tonnes through 2060, according to Dai.
Independent research firm Gavekal noted in a report on Monday that China’s oil demand “may already have topped out”, citing slowing growth in transport fuels as electric vehicles and heavy-duty trucks reshaped consumption patterns. Heavy trucks alone account for about half of the nation’s transport fuel consumption.