While headline GDP growth remains a reference point for market sentiment, the composition of China's oil demand through 2030 will be determined increasingly by sector-specific transitions. Transport, manufacturing, and chemicals, the three core pillars of consumption - are showing distinct differences in their trajectories under the combined influence of policy, technological change, and the ongoing energy transition. This chapter assesses how these shifts will reshape China's demand structure, product mix, and trade flows over the remainder of the decade.
1 | Transport: Electrification and Modal Shift Reshape Fuel Use
Road transport remains the single largest driver of fuel consumption decline. Passenger vehicle electrification is advancing rapidly, with New Energy Vehicles (NEVs) projected to approach three-quarters of new sales by 2030 and exceed one-third of the total fleet.
China's Passenger Vehicle New Car Sales Composition (2025-2030e)
Source: CAAC, GL Consulting
Stricter fuel efficiency standards, targeted purchase incentives, and regional usage restrictions on internal combustion engine vehicles are accelerating the phase-down of gasoline cars.
In freight, diesel faces dual substitution pressures. LNG-powered heavy-duty trucks now account for close to one-third of sales, while Electric heavy-duty trucks (HDTs) - once limited to short-haul applications - are entering long-haul segments as battery range and charging infrastructure improve. The "road-to-rail" initiative, combined with expanded waterway capacity, is further diverting bulk cargo from roads, intensifying the decline in diesel demand.
Aviation fuel consumption is recovering with air travel growth and airport expansion, but efficiency gains and Sustainable Aviation Fuel (SAF) mandates from 2025 will limit long-term demand growth. SAF's share of total aviation fuel is expected to remain modest by 2030 but will rise steadily as global compliance requirements tighten.
2 | Manufacturing: Industrial Upgrading Lowers Oil Intensity
Manufacturing's direct oil use is diminishing as output shifts toward electronics, advanced machinery, and green technology, lowering energy intensity per unit of GDP. Heavy industry demand for fuel oil and diesel is increasingly cyclical and policy-driven, tied to targeted investment in sectors such as steel, cement, and non-ferrous metals.
The electrification of industrial processes - supported by record investment in power grid infrastructure - will gradually displace fossil fuels in onsite generation and industrial logistics. This transition aligns with national energy security and decarbonization objectives, accelerating the shift away from oil-based inputs in production.
3 | Chemicals: "Less Fuels, More Chemicals" Supports Feedstock Demand
In contrast to fuels, chemical feedstocks remain structurally resilient. New ethylene and PX capacities due online before 2030 are expected to sustain naphtha and LPG demand, with imports of high-quality light naphtha projected to grow at double-digit annual rates. LPG imports are also set to expand steadily, underpinned by the petrochemical sector's structural feedstock needs.
Fuel oil, however, is on a structural decline trajectory, with LSFO bunkering demand insufficient to offset broader contraction. This divergence within the oil complex reinforces the strategic pivot toward integrated refining-petrochemical configurations to capture more stable margins.
4 | Oil Demand Outcomes Under Alternative Scenarios
Scenario modelling indicates that under a high-growth case, robust petrochemical output could partially offset declines in transport fuels, keeping total oil demand broadly stable in the medium term. In a low-growth or aggressive decarbonization case, substitution in road transport would outweigh gains in chemicals, leading to a structural contraction in total consumption.
The baseline trajectory points to a decisive shift in demand composition toward chemical feedstocks, with refiners' integration levels and product flexibility becoming critical determinants of profitability in a structurally smaller oil market.
5 | Strategic Implications: Realigning Portfolios to Sectoral Realities
The sectoral rebalancing underway demands a recalibration of both asset allocation and trade strategy:
- Deepen integration with chemicals to capture resilient feedstock margins.
- Diversify export portfolios to absorb domestic surpluses in gasoline and diesel.
- Embed sector-specific scenario analysis into investment and trading decisions to anticipate policy, technology, and demand inflection points.
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In this transition, value creation will depend on the ability to strengthen chemical integration for more stable margins, adjust export portfolios to manage transport fuel surpluses, and incorporate sector-specific scenarios into planning to anticipate policy and technology shifts. |
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