Shifting behaviour: Bullet trains at Nanjing railway station in China. Petrol consumption has dropped 5% since early July as more people use the trains for travel. — AFP
Beijing: China’s embrace of clean energy means petrol sales are no longer getting their usual bump from holiday travel.
Domestic tourists have been out in force this summer, but fossil fuels are playing less of a role in ferrying them around the country.
Instead, electricity-driven high-speed rail and electric vehicles (EVs) are eating into petrol’s share, in yet another example of how oil demand in the world’s biggest importer is stalling as the green transition gathers pace.
Petrol receipts at China’s two biggest retailers, PetroChina Co and Sinopec, have dropped more than 5% since the start of July, according to people familiar with the matter, who asked not to be named because the information isn’t public.
Sinopec declined to comment, while PetroChina didn’t immediately respond to a request for comment.
It’s a time of year when sales and prices of motor fuel usually rise, but people are opting instead for alternative modes of transport, including cheaper rail journeys.
This summer has also been marked by extreme weather across the country, from scorching heat to torrential rains, which may have kept people from taking long trips in their vehicles.
And those that do travel under their own steam are increasingly likely to do so in electric cars.
The rail network has carried 605 million passengers since the start of July, 6.1% more than last year, according to figures from China Railway Group.
That raises demand for cabs once travellers reach their destination. Ride-hailing giant Didi Global Inc, which is ubiquitous across China, has a fleet that is predominantly electric.
“The uptick in petrol demand this year is lagging far behind last year’s level,” said Hu Xue, an analyst at industry consultant JLC.
She estimated that apparent demand – production plus imports – for the motor fuel actually edged lower in July and August, after recording 20% annual growth over the same period last year.
Petrol accounts for about a quarter of China’s oil market, and a drop in consumption from the nation that consumes one in six barrels globally is a major headwind for world prices.
International agencies from Opec to the US Energy Information Administration have in recent weeks trimmed their forecasts for demand, citing softness in China.
Chinese refiners have also sounded the alarm.
The sector’s profits plunged over 90% in the first half, according to the China Petroleum and Chemical Industry Federation. The situation has probably worsened after processors raised their petrol yields to meet an expected recovery in holiday usage that hasn’t materialised.
That’s fuelling an increase in exports as refineries look abroad for customers to soak up their surplus. Overseas sales of petrol were running at 280,000 barrels a day in the first two weeks of August, from 210,000 barrels a day in July, according to Vortexa Ltd.
Beijing’s policy biases also paint a bleak picture for consumption going forward. The take-up of EVs and investment in high-speed rail have blunted Chinese demand for petrol, which is set to peak by 2025, the International Energy Agency said in June.
In other commodities news, iron ore remains under pressure on concerns over an expanding global glut, with low-grade spot material hitting the lowest since 2022, and banks forecasting that benchmark prices could sink into the US$80s-a-tonne range.
Meanwhile, CK Infrastructure Holdings Ltd is nearing a deal to buy a portfolio of wind farms in Britain from Aviva Plc’s asset-management arm, according to people familiar with the matter.
China’s economy probably failed to turn the corner on its worst stretch in five quarters, with an uneven recovery in July held back by consumer spending still lagging industrial activity and investment.
China’s pig prices are expected to fall in the second half of the year amid ample supplies and sluggish demand, according to the world’s top pork producer. — Bloomberg
