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Chinese transition: will the renewable energy revolution lead to a decline in oil demand
China has become the largest consumer of energy resources in recent years. Over the past 20 years, it is the consumption of oil and gas in China that has gradually become the most important factor in the international hydrocarbon market — this can be judged at least by how investors react to every news about the Chinese economy. This also applies to Russia, which has increased its supplies to the east after sanctions from the European Union. At the same time, China is rapidly increasing its capacity to produce electricity, including from renewable sources (RES), which may lead to a decline in oil imports. Izvestia interviewed experts about how dangerous the development of Chinese renewable energy sources is for the global oil and gas market and where hydrocarbon flows from Russia can be redirected in the event of a decrease in consumption in China.
Despite quite serious problems, including deflation and the downturn in the real estate market, the Chinese economy continues to grow at a significant pace — about 5% per year. China's GDP growth is also confirmed by such indicators as an increase in energy consumption. In 2024, the consumption of primary energy (of all types) in the country increased by almost 10% by 2023, reaching 176 EJ. At first glance, it looks like a bottomless market for fuel exporters to the country, especially since China's oil and gas production is growing much more slowly.
But it's not that simple. China has been experiencing a real boom in electrification in recent years. In 2024, the total installed generation capacity in the country reached 3,349 GW, 14.6% more than a year earlier. At the same time, renewable sources provided 56% of this volume. The plan to install renewable energy capacity (1,200 GW by 2030) was beaten six years before the target date. It's the same story with consumption. China became the first major economy in the world in which the share of electric vehicles from all cars sold reached 50% last year. In 2025, this share may increase even more. This was reflected in the consumption of fossil fuels, which showed a 2.5% decline in 2024 compared to the level of 2021.
In this regard, there is serious concern about China's ability to support the growth of global oil demand, which it has been doing regularly over the past couple of decades. Analysts believe that this prospect is quite real, but there are significant nuances.
"China will take into account geopolitical risks"
Maria Belova, Director of Research at the Implementation Company
Today, China's transportation segment provides half of the domestic demand for oil. According to Sinopec forecasts, there will be an increase in oil consumption in the next three years, both in this segment of consumption and in the country as a whole. However, in 2028-2030, the trend will change, and then there will be an accelerated reduction in demand for motor fuels, since in the last three years the rate of development of vehicles using new energy sources has exceeded expectations. Since China is the world's largest importer of oil, its trends in black gold consumption related to energy transition will affect global demand.
If China reduces its oil consumption and, consequently, oil imports, the main alternative sources of demand will be India, which is increasing purchases due to population and industrial growth, the developing countries of the Asia-Pacific region (primarily Indonesia, Thailand and Vietnam), which are fast—growing markets for automobiles and petrochemicals, and the Middle East region, refineries and petrochemical clusters. which (for example, in Saudi Arabia) will increase the demand for crude oil. And finally, Africa, where population growth and urbanization can support demand, especially if oil is competitive compared to other fuels. However, none of these regions will completely replace China — their combined growth will not compensate for the sharp decline in Chinese imports, if it occurs. Consequently, the peak of global oil demand will be passed.
With oil demand declining, China will prioritize its own oil production in the interests of energy security. As for closing the need for imports, the country will also proceed not only from purely economic interests (and buy the cheapest oil), but also take into account geopolitical and logistical risks. In this sense, pipeline oil supplies, as well as short-haul marine supplies from the Russian Federation, will have priority.
From the point of view of gas, the situation for Russian gas is even more comfortable, since China is not expected to pass the peak of demand for natural gas, rather, on the contrary, its consumption is projected to increase. Therefore, the country will be interested in increasing gas purchases from Russia.
"Demand for gas will grow"
Tamara Safonova, Associate Professor at the Institute of Economics, Mathematics and Information Technology of the Presidential Academy
China is increasing energy production from renewable sources, with an increase of 16% in 2024, including hydropower production increased by 10%, solar by 43%, and wind by 12%. Oil consumption grew steadily in China until 2023, with a decrease estimated at 2% last year. Gas consumption in China increased by 7% in 2024. A slight decrease in oil consumption is due to the development of electric transport and an increase in its share in the Chinese market. At the same time, the growing capacity of renewable energy meets the needs of China's dynamically developing industrial sector.
The demand for gas in China will grow to develop energy—intensive industries, expand gas infrastructure for the needs of the population, and switch energy from coal to a cleaner fuel, gas. The development of renewable energy in China, as well as cooperation with Russia in terms of stable energy supplies, is a strategically important area for ensuring the country's energy security.
"Petrochemicals will provide demand"
Antonina Levashenko, Head of the Laboratory for the Analysis of the Best International Practices at the Gaidar Institute
Leadership in the production and sale of electric vehicles allowed China (60% of global sales in 2023, according to the International Energy Agency (IEA)) to systematically reduce oil demand by 1.2 million barrels per day from 2019 (by 1-2% per year), and, according to IEA forecasts, by 2030 demand will decrease by another 2.5 million b/d. According to forecasts, by this point, almost every third car on China's roads will be electric. In this regard, BP predicts in the report that China will reach the ceiling of oil consumption for fuel in 2030, and the IEA predicts that as early as 2025.
For the world, this demonstrates a trend towards a decline in oil demand, since China was one of the world's main oil consumers in the 2000s and 2020s (19% of global demand, according to the Energy Institute), including the main consumer of Russian oil (in those years, demand grew by 6% every year, now it is declining). At the same time, in 2025-2030, China's demand for Russian oil will still be provided by a large number of petrochemical plants processing polymers and synthetic fibers. However, it will decrease further, as China itself sets the goal of significantly reducing oil consumption by 2030 as the national goal of the 14th five-year plan.
The loss of Chinese imports for Russia at the stage up to 2050 will be restored due to the growth of developing countries. India will remain the main supply leader, thanks to GDP growth and industrialization. In Africa, the demand for all petroleum products will grow by about 2% per year, which will be supported by the growth of GDP and population of the continent. In this regard, it is expected that oil exports from Russia in 2030-2050 will almost completely reorient to the Asia-Pacific countries (for example, Vietnam), as well as countries in Africa and Latin America.
"The effect of energy transfer will not appear immediately"
Sergey Kaufman, Analyst at FG Finam
The effect of China's gradual transition to electric transport on the oil market will not be immediately noticeable. Currently, sales of electric vehicles and hybrids account for more than 50% of total car sales in the country. However, their share among existing cars is less than 10%, since replacing existing cars with internal combustion engines with electric vehicles will be a long process. It's also important to note that hybrids that rely on more than just an electric motor are comparable in popularity to electric vehicles in China. Against this background, we do not expect a rapid decline in oil demand in China in the foreseeable future, but we believe it is likely that demand in China will peak in the coming years.
OPEC in its forecasts notes that in the next 20-25 years, the drivers of global oil demand may be regions where the economy and population are still growing. In particular, it can be India, Southeast Asia, a number of countries in Africa and Latin America. At the same time, in developed economies, oil demand may decrease over the same period due to the development of renewable energy and electric transport and the trend towards population decline, and therefore we believe that the peak in oil demand may be in the range of 105-115 million bpd, which is lower than the values predicted by OPEC.
In our opinion, the active development of renewable energy in China is one of the risks for the Russian gas industry, as solar and wind generation partially replace gas and coal. In particular, given the development of renewable energy and the projected decline in the population, the Power of Siberia–2 project or planned LNG projects (Murmansk LNG, Arctic LNG-1, etc.) may be less in demand for China. At the same time, this may become a problem in the long term rather than in the coming years. We do not expect years of difficulties in exporting oil and gas to China.
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