Is China’s Thirst for Oil Declining?

Oil is one of the most important commodities of the 21st century. It’s the lifeblood of industrialised nations. It’s one of the most important sources of energy. It fuels the transportation of billions of people, every year.  But then why is demand for oil around the world declining?

Take a look at the graphs below, all showing consumptions:

oil consumption

Source: Peak Oil Barrel

Demand for Oil

While more developed economies are decreasing their oil consumption, less developed nations continue to consume more oil each year. However, will less developed economies like China start to consume less oil as they become more developed?

Maybe. But demand for oil will likely continue, as China pulls more of their population out of poverty and into the middle income class.

However, highlighted in the Australian Financial Review this morning, China’s plans to phase out conventional gas guzzling vehicles could put a damper on their demand for oil.

To combat air pollution and close a competitive gap between its newer domestic automakers and their global rivals, China has set goals for electric and plug-in hybrid cars to make up at least a fifth of Chinese auto sales by 2025,’ the AFR writes.

Last month, state oil major China National Petroleum Corp (CNPC) said China’s energy demand would peak by 2040, later than the previous forecast of 2035, as transportation fuel consumption rises through the middle of the century.

Song Qiuling, a senior finance ministry official, said that government subsidies, intended for jump-starting the new energy auto industry, could easily be abused if held long-term and led to “mindless expansion” and excess capacity in the sector, Xinhua reported.

She said China would gradually withdraw such financial subsidies for the sector, and instead speed up the establishment of a credits accumulation policy to support the industry.

Regards,

Härje Ronngard,

Junior Analyst, Markets & Money

PS: Oil probably isn’t the safest commodities to bet on. Not only is supply dictated by oil producing nations, the level of consumption across the developed world is falling. Why not put your money in commodities which are booming?

Resource Analyst, Jason Stevenson names the top ten resource stocks profiting from booming commodities in his Markets and Money report ‘The Top 10 Mining Stocks in Australia For 2017’.

Check out Jason’s free report and find what resource stocks could race up in 2017.


Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.


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