China’s rapid shift to electric vehicles and high-speed rail is already meaningfully curbing the world’s thirst for oil, new data from the International Energy Agency (IEA) and Bloomberg NEF shows.
Globally, EVs are displacing close to 1.8 million barrels of oil every day — roughly the same amount as Mexico consumes, according to BloombergNEF. China is responsible for more than half of that total, with its EV fleet effectively trimming worldwide oil use by over 1%.
There’s a long way to go to replace all the petrol- and diesel-guzzling cars already on China’s roads, but the shift is accelerating partly because most electric models are now cheaper than their internal combustion engine equivalents. The government has also raised subsidies for consumers who trade in their old fossil fuel-powered cars and go electric.
Fully electric models and plug-in hybrids accounted for more than 50% of total new vehicle sales in China in July and August, according to the nation’s passenger car association. There are now more than 25 million of these so-called “new energy vehicles” on the nation’s roads — or around 7% of the total stock.
“Burgeoning domestic sales of vehicles powered by alternative fuels are cutting into oil demand for road transport, while the development of a vast national high-speed rail network is constraining growth in internal air travel,” the IEA said in a monthly outlook report.
The agency expects world oil demand growth to slow to 0.9% in 2024, down from 2.1% in 2023. The China-induced slowdown has already weighed on oil prices — and inflation more broadly.
“This year’s deceleration may mark the start of a period of progressively more sluggish gains in oil consumption, as major technological, behavioural and demographic shifts cause demand to decouple from underlying GDP,” the IEA says.
“With the steam seemingly running out of Chinese oil demand growth, and only lacklustre increases or declines in many other countries, current trends reinforce the expectation of global demand plateauing by the end of this decade.”
According to BloombergNEF’s analysis, EVs will likely displace around 3.6 million barrels of oil a day by 2027 — and China alone will be responsible for over 2 million of those barrels. This’ll cause oil use in the road sector to peak that year, despite steadily rising vehicle adoption in developing nations.
By 2035, EVs will likely displace 13 million barrels per day, according to the IEA’s forecasts.
However, oil demand is expected to remain elevated in other sectors that are tougher to decarbonise, including aviation and petrochemicals (which are used to make plastics, among other products).
Meanwhile, Chinese authorities plan to leverage the country’s growing fleet of EVs to support the electrical grid. Each province will be asked to nominate one city to set up a vehicle-to-grid programme, where electric cars can feed power back into the grid during times of high demand, Bloomberg reported in early September.
