China's demand for refined oil is anticipated to experience an accelerated decline in 2025, a consequence of the nation's quickening pace in energy transition, according to industry experts. This shift marks a significant turning point after years of steady growth in oil consumption, driven by fundamental changes in the country's economic model and transportation sector.

The adoption and increased usage of electric vehicles (EVs) are key factors contributing to this trend. Ye Lin, vice-president of oil market research at global consultancy Rystad Energy, noted that while China's overall oil demand outlook was recently raised by 100,000 barrels per day, the burgeoning EV market is expected to cause a decrease in gasoline demand this year. This indicates a substantial impact of new energy vehicles on traditional fuel consumption patterns.

Similarly, the trucking sector is witnessing significant changes. The penetration of electric trucks, alongside liquefied natural gas (LNG) and compressed natural gas (CNG) trucks, is exerting downward pressure on diesel demand. Ye Lin highlighted that the peak and subsequent flattening of diesel demand in China are linked to ongoing transformations in its economic model. Furthermore, the faster adoption of LNG trucks has notably pressured diesel demand since 2023, contributing to its decline last year.

Data from 2024 illustrates the tangible impact of these new energy alternatives. New Energy Vehicles (NEVs) and LNG heavy trucks were instrumental in reducing China's reliance on traditional fuels, displacing nearly 53 million metric tons of gasoline and diesel. This displacement resulted in an overall decline of 2.4 percent year-on-year in refined oil consumption compared to 2023. According to Ye, both gasoline and diesel demand in China have now entered a declining trajectory.

In response to these evolving market dynamics, China's oil and gas industry is undergoing a significant transformation. Greenfield refining capacities established in recent years are leading a shift from producing fuels to manufacturing petrochemicals. State-owned refineries are also actively upgrading their configurations by adopting new refining technologies to adapt to the changing demand landscape. A recent report from a domestic think tank suggests that the broader decrease in refined fuel demand in 2025 will likely promote greater standardization within the market and could accelerate the phasing out of outdated refining capacity.

The year 2024 saw China's overall oil consumption decrease year-on-year, a departure from previous growth trends, as demand for refined oil products peaked and began to fall. Domestic refining capacity remained largely stable during this period, but output decreased, and exports resumed a downward trend. Notably, domestic prices for refined oil products fell more sharply than international crude oil prices.

Lin Boqiang, head of the China Institute for Studies in Energy Policy at Xiamen University, affirmed that China's oil product consumption reached a turning point in the previous year, signaling an end to consistent growth. He attributed this shift to evolving economic development models, the development of an efficient integrated transport system, and the rapid adoption of cleaner transportation methods, all of which have steadily slowed the growth of refined oil consumption in the country.

Industry experts believe that the oil and gas sector in China is actively adjusting to these new energy trends. The challenge lies in harmonizing national energy security with the imperative of a green, low-carbon transition, a balance that the industry is striving to achieve amidst these significant market shifts.