APPEC: BOCI predicts China’s transportation fuel demand to peak at 380 million tonnes in 2025

Strong points

Demand for transport fuel will fall to 250 million tonnes in 2050

Focus on infrastructure investments and budget spending in Q4

GDP growth in 2022 will slow to 5.3%, with sustainability at the center of the agenda

Bank of China International Global Commodities expects China’s transportation fuel demand to peak at 380 million tonnes in 2025 as country accelerates energy transition to achieve carbon neutrality goal by 2060 , said Xiao Fu, head of its commodities markets strategy, on September 28 at the Asia Pacific Petroleum Conference in Singapore.

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“The [transportation fuel] demand will gradually drop to 250 million tonnes in 2050, ”said Fu.

Transportation fuels include gasoline, diesel, jet fuel and bunker fuel. Demand for these fuels was less than 350 million tonnes in 2020, according to BOCI.

With improved energy efficiency and increased transportation of electric vehicles, demand for road fuel is expected to fall to 130 million tonnes in 2050, from 280 million tonnes in 2020, Fu said.

Road fuel mainly refers to gasoline and diesel.

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President Xi Jinping has set a target of reducing China’s CO2 emissions per unit of GDP by 2030 by more than 65% from 2005 levels, while increasing the share of non-fossil fuels in fuel consumption. primary energy at about 25%.

In the shorter term, BOCI expects a slight year-over-year decline in China’s oil demand in the third quarter due to the Chinese government’s zero-tolerance checks amid the variant outbreak delta, but volume should pick up moderately from Q4 2021.

The Chinese economy slowed further in the third quarter. The delta variant of the coronavirus has affected consumption and the service sector, while the real estate crunch has strained the growth of capital investment and the financial market, Fu said.

The country has shifted its capital investments from traditional investments to new ones such as green infrastructure, including the rail system, according to Fu.

China’s infrastructure projects typically drive the demand for diesel fuel due to the consumption of construction fuel and transportation fuel. However, the rail system uses electricity to replace gasoline, diesel and jet fuel as long-distance transportation fuel, while electric vehicles will be the alternative to gasoline-powered cars.

The risks are skewed towards falling oil prices in the second half of 2021 and 2022, Fu said. Slow economic growth in China would dampen the growth in oil demand, while prolonged travel restrictions across the border would also limit the recovery in oil demand, Fu added.

Beijing is adopting zero-tolerance checks against COVID-19 to stabilize domestic life and as it prepares for the next Winter Olympics in February 2022. Meanwhile, lockdowns, even partial, have significantly dampened demand of jet fuel.

“In the remaining year 2021, infrastructure investments and budget spending will be critical [factors] to watch, to understand how much China wants to support growth, ”Fu said, adding that BOCI estimated China’s GDP growth to be 8.4% in 2021 and slow to 5.3% in 2022.

To sum up, China may complete regulatory changes by December this year, after which Chinese policymakers will focus on growth in 2022, with the political priority gradually shifting to sustainability and confidence building, especially ahead of the congress. of the 20th Party (Chinese Communist Party). next fall, Fu said.

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