On a freezing December morning, hundreds of oil traders, industry researchers and government officials battled bumper-to-bumper congestion as they headed to a hotel north of Beijing’s Forbidden City for an annual conference hosted by the country’s top energy producer. The city’s notorious traffic had returned in full force, the latest sign that China’s economic activity was bouncing back after its early containment of the coronavirus. In the hotel’s ballroom, a China National Petroleum Corp. official shared the good news: road-fuel consumption had surpassed pre-virus levels, after taking a brutal hit during the nation’s sweeping lockdowns.
In fact, demand for most oil products had fully returned to normal levels as early as May, reflecting the resilience of the only major economy that managed to grow last year. But the speedy comeback also complicates a parallel push by Beijing to reach peak fossil energy consumption in this decade and turn the country into a nation of net-zero emissions less than 40 years later.
Drastically cutting its consumption of coal, which is responsible for the majority of China’s emissions, will be crucial. But in the shorter term it will also have to reduce the usage of crude. While the government hasn’t laid out detailed milestones to reach the 2060 carbon neutrality target set by President Xi Jinping, the country’s three state-owned oil titans—CNPC, Sinopec Group and China National Offshore Oil Corp.—agree that consumption of their core product has to peak as soon as 2025.
2025 Peak
China expects its crude oil demand to reach highest level in this decade
Source: CNPC
“It’s important for oil consumption to peak by 2025,” said Yang Fuqiang, a Beijing-based senior adviser to Natural Resources Defense Council, a leading U.S. environmental group. The Chinese appetite for oil does less to drive global warming than coal, but it still accounts for roughly 20% of greenhouse gases from the nation’s energy sector, making it a strong climate lever. Coal consumption, though large, peaked in 2013. Oil, on the other hand, has been rising.
arresting that trend will be integral to reaching China’s target of having a quarter of its energy come from non-fossil fuel sources by 2030. The nation has been putting forward deadlines to cap oil demand since 2016. Each year, in their planning documents, the oil giants have stuck to a rough timeline of 2025 to 2030, while raising their estimates for the level at which demand will peak to account for aggressive growth in oil consumption.
The prospects for peak demand in China are also crucial in determining when global consumption will peak, seen as a key milestone in the world’s fight against global warning. Over the last three decades, China has been the dominant driver of the global oil market: demand has risen almost seven-fold to more than 14 million barrels a day, according to BP Plc data, turning from an exporter into the world’s largest importer.
The latest prediction for peak oil, announced at CNPC’s December meeting in Beijing, was 740 million tons, or 14.9 million barrels day. That’s about 1 million barrels per day higher than its own estimate four years ago. Burning that much extra oil could add 110 million to 146 million metric tons of CO₂ to the atmosphere a year, as much as the annual emissions of Qatar or Nigeria.
About 54% of China’s oil is used for transportation. So far, the government has focused on shrinking that segment by boosting a nationwide electric vehicle fleet that’s already by far the biggest in the world. Retail sales of new energy vehicles, including electric autos, soared more than 200% in January. And there’s plenty of room to grow. There are only about 275 million automobiles in use in China, a country of more than 1.4 billion people.