Column: China’s rapid electrification threatens oil-producing countries, risks to outlook for demand growth

October 16: One of the factors that will affect the oil market this year is the overestimation of China’s demand for crude oil. The photo shows an EV running in Beijing in October 2023 (2024 Reuters / Tingshu Wang)

[ローンセストン（オーストラリア）　１６日 ロイター] – One of the factors that will affect the oil market this year is the overestimation of China’s crude oil demand. In particular, the Organization of the Petroleum Exporting Countries (OPEC) overestimates it. The validity of this assessment of oil demand in China is likely to be a topic that will continue for years to come.

According to the World Energy Outlook 2024 (WEO) published by the International Energy Agency (IEA) on the 16th, electric mobility, in which the energy used in transport means switch from fossil fuels to electricity, you will put your bottom line at risk. .”

In addition, in the case of China, although it is the world’s largest oil importer, it is leading the distribution of electric vehicles (EVs), and the share of EVs in domestic new car sales has reached 50% Other countries around the world are expected to reach the same level by 2030.

In addition, the “STEP (Expanded Policy Scenario)” baseline scenario developed by the IEA based on current policies predicts that global crude oil demand will decrease by approximately 6 million barrels per day as a result of distribution of EVs.

However, China accounted for two-thirds of the world’s oil demand growth and one-third of the world’s natural gas growth in the 10 years to 2023, and members of the OPEC oil-producing countries expect long-term increases in time in oil demand. The view remains the same.

On the other hand, there are significant risks to the outlook for oil demand growth. Instead of China still being a prominent country in terms of renewable energy and electrification, as it is now, China should be an example of a case.

China’s electricity demand used to increase in line with its gross domestic product (GDP), but since 2019 it has grown nearly 50% faster than GDP, according to the IEA.

This means that China’s electricity consumption per capita will surpass that of all developed countries by 2030, thanks to economic growth, rising incomes, and policies to promote electricity.

According to the WEO, the share of electricity in China’s final consumption exceeded that of oil in 2023.

“According to STEP, by 2030, nearly one-third of China’s final energy consumption will be electricity, overtaking Japan to become the world’s most electrified economy,” WEO said. , China’s per capita oil demand is expected to peak at about half the level of developed countries.

It is clear that China is strongly promoting electrification, and currently has a large share of the production of solar panels, storage batteries, and EVs. China is using these advantages to reduce its dependence on expensive fossil fuel imports.

Crude oil may be the biggest influence on China’s rapid electrification. China’s overall oil demand is expected to peak in the next few years, but the mix of refined petroleum products needed domestically could also change.

In other words, while the amount of gasoline and diesel oil used decreases, it is expected that naphtha (crude gasoline) will be needed more than ever to meet the increasing demand. grown for petrochemicals. Jet fuel requirements may increase similarly as air travel expands.

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The author is a columnist for “Reuters Breakingviews.” This column is based on the personal opinion of the author.

Clyde Russell is the Asia columnist for Commodities and Energy at Reuters. He has been a journalist and editor for four decades, covering everything from wars in Africa to the rise of resources. Born in Glasgow, he has lived in Johannesburg, Sydney, Singapore and now divides his time between Tasmania and Asia. He writes about trends in commodity and energy markets, with a particular focus on China. Before becoming a financial journalist in 1996, Clyde covered civil wars in Angola, Mozambique and other African hot spots for Agence-France Presse.