China’s Fuel Demand May Peak Sooner Than Expected

Sinopec chairman suggests diesel peak may be in 2017, with potential affects on western oil suppliers.

April 07, 2015

BEIJING – China’s biggest oil refiner, Sinopec, is signaling that the nation is headed to its peak diesel and gasoline consumption far sooner than most Western energy companies and analysts are forecasting, writes FuelFix.com.

The company’s prediction could pose a major challenge to the world’s largest oil companies which are counting on demand from China, and other developing countries, as energy consumption falls in more advanced economies.

According to the report, the peak in China’s diesel demand is just two years away, in 2017, according to Sinopec Chairman Fu Chengyu, who gave his outlook late last month. The high point in gasoline sales is likely to come in about a decade, he said, and the company is already preparing for the day when selling fuel is what he called a “non-core” activity. Sinopec is already planning for the time when its primary business isn’t selling fuels but consumer goods at its shops and filling stations that blanket the nation.

“That forecast, from a company whose 30,000 gas stations and 23,000 convenience stores arguably give it a better view on the market than anyone else, runs counter to the narrative heard regularly from Western oil drillers that Chinese demand for their product will increase for decades to come,” writes Fuel Fix.

But signs of China’s energy slowdown are already evident. Diesel demand declined last year, and growth in crude oil consumption has shriveled. Crude use is projected to rise about 3% this year, less than half the rate of the total economy. Further, China’s political leadership is trying to wean the economy off debt-fueled property investment and old-line smokestack industries, shifting toward services and domestic-consumption led growth.

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