File Photo: Xinhua

Demand for refined oil products in China is expected to peak in 2025, as energy efficiency increases, the global economy faces downward pressure and new-energy vehicles form a new transport order, according to a recent report by the China National Petroleum Corp, the country's largest oil producer. These products, including gasoline, diesel and jet fuel, have fueled modern transportation, the global economy and geopolitics as well as climate issues, and the world is speeding up a new round of energy progress, aiming for clean, efficient, and safe energy systems.

China's refined oil consumption rose slightly by 0.6 percent year-on-year in 2018, and slid 3.7 percent in 2019 to 311 million tons, the report said. The COVID-19 pandemic has battered refined oil demand in 2020, and in the post-epidemic period it is set to plateau. South China's Hainan Province, for example, has proactively been promoting new-energy vehicles, aiming to end sales of gasoline and diesel-powered vehicles by 2030. World oil giants including Shell, CNPC and BP have unveiled plans to be net zero emissions energy businesses by 2050; BP sold off its petrochemical business in June to help the company achieve the target.

CNPC's planning institute said refined oil demand in China will maintain a 0.91 percent growth rate during China's 14th Five-Year Plan period (2021-2025), and is expected to peak at approximately 312 million tons by 2025. The report said China's diesel demand peaked in 2015 and fell 8.2 percent year-on-year to 145 million tons in 2019 as economic growth slowed. Gasoline demand plummeted 0.6 percent year-on-year to 126 million tons in 2019, and is expected to peak in 2024. Jet fuel demand contributes to China's overall refined oil demand growth, as it rose 4.7 percent year-on-year to 38.85 million tons in 2019, said the report, adding that this year's jet fuel consumption plummeted due to the impact of the COVID-19 pandemic, but it will swiftly recover when the epidemic is contained globally.

Meanwhile, a new transport system is emerging as China actively promotes vehicles powered by natural gas, methanol, ethanol, biogas and biodiesel, electric vehicles, and fuel cell vehicles. Alternative fuels and electric vehicles are developing at a fast pace, likely meaning refined oil demand will peak in the next few years. According to data compiled by China's Ministry of Public Security in July, the nationwide ownership of new-energy vehicles hit 4.17 million units by June, up 360,000 units, or 9.45 percent, compared with the end of 2019.

Yet even with a new transport system, refined oil products will still account for the largest proportion of energy use in the transport sector for a long time, industry experts told the Global Times. But an old question is that China has faced overcapacity in the refining sector for many years. China has the capacity for more than 800 million tons of crude oil per year, but the country actually processed about 568 million tons of crude oil in 2017. How to resolve the issue is becoming increasingly crucial, particularly as demand for refined oil products peaks.

For now, new refining projects are shifting from refined oil to chemical materials in the country. To hedge against market risks, big refiners are eyeing integrated refining projects as they can adjust production capacity between refined oil and chemical materials based on market trends. But small refineries may face bankruptcy risks and restructuring due to insufficient funds and harsh policies on environment issues. Meanwhile, China is encouraging refined petroleum producers to seek overseas markets as domestic sales growth slows.