Global Gasoline Demand Stagnates Amid Rise of Electric Vehicles in China and US

The global demand for gasoline continues to rise, but the pace of growth is expected to slow significantly in 2024. This trend, which could negatively impact the margins of oil companies in the latter half of the year, is attributed to the increasing adoption of electric vehicles (EVs) in China and the United States, as well as the normalization of consumption following the post-COVID-19 rebound.

Rise of Electric Vehicles

Declining Growth Rate

Forecasts suggest that gasoline demand will increase by 340,000 barrels per day in 2024, less than half of the 700,000 barrels per day increase seen last year. China is expected to reach its peak oil consumption this year, with demand decreasing by 2025. This should come as no surprise given that one in four new cars sold in China is electric.

“The penetration of electric vehicles has been increasing in the United States and China. For this year, Chinese demand will grow only 10,000 barrels per day due to the greater adoption of electric vehicles,” explained Sushant Gupta, an analyst at Woodmac, to Reuters. Sinopec, China’s largest refiner, anticipates a 1.7% rise in gasoline demand this year.

Impact on Refining Margins

This shift will compel Chinese refiners to boost fuel exports to the rest of Asia, necessitating increased production of gasoline, diesel, and jet fuel. This, in turn, is expected to reduce refining margins in the region. “It will be a challenge for refineries to rebalance their production,” warned Toril Bosoni, head of the oil industry and markets division at the International Energy Agency, last year.

Rise of Electric Vehicles

Peak Oil Consumption

China is projected to reach its peak oil consumption in 2024, while the United States hit its peak last decade. The combined sales of battery electric cars and plug-in hybrids could achieve a market share of 45% in China, 25% in Europe, and over 11% in the United States. Despite the modest figure in the US, gasoline consumption peaked in 2018 and has since declined. Similarly, growth in Europe is stagnating.

Future Market Surplus

The peaks in China and the US could lead to a global surplus in gasoline markets starting in 2025, resulting in increased competition and reduced profits for the sector. By 2028, China, India, and North America are likely to transition from balanced markets to net exporters, a situation that will intensify as major global markets continue to electrify.

This slowdown in gasoline demand growth underscores the significant impact of the rising adoption of electric vehicles and highlights the challenges faced by the oil industry in adapting to a changing energy landscape.

Source- Reuters

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