Daily Energy Report
China gasoline demand, Korea strands Russia product, India fuel demand, Panama Canal delay, Trans Mountain pipeline & Canadian oil prices, Iran sanctions reality, and more.
Chart of the Day: China’s Gasoline Demand Remains at Record High, YoY, Despite EVs!
Summary
Figure (1) above shows trends in total gasoline consumption in China. Consumption surpassed pre-coved levels three years ago and continues to grow. Despite lower-than-expected economic growth in the first quarter of 2024, gasoline consumption was at a record high. However, we need more time to figure out the actual growth over 2023.
EOA’s Main Takeaways
The story among media outlets and oil market analysts is that growth in demand for gasoline in China is declining rapidly with the increased penetration of electric vehicles.
Reuters: Gasoline demand growth to slow this year on EV growth in China, U.S.
There are about 21 million electric vehicles on Chinese roads today. Assuming all of them are replaced gasoline cars, the replacement is less than 500,000 b/d of gasoline demand. But at the same time, the number of ICE vehicles increased by more than 55 million during the same period. The issue here is this: when will electric vehicles cause demand for gasoline to decline? Many, including Chinese oil majors, think it will happen soon.
China Daily: Nation's demand for oil products to peak before '25
Bloomberg: China Reaches Peak Gasoline in Milestone for Electric Vehicles
We believe that gasoline demand will NOT peak in 2025, despite the growth in electric vehicles. We also emphasize the idea that a peak in gasoline demand does not mean a peak in oil demand. As we explained in this report: Impact of EVs on Oil Demand and Emissions Greatly Exaggerated, even if demand for gasoline peaks, the demand for naphtha and LPG is going through the roof! Both are used to make the materials for the electric vehicles that China is making. The lesson here is clear: look at the net impact on oil demand, not the direct impact on gasoline demand.
While China is investing more than any other country in renewable energy, and by a large margin, almost 60% of electricity is generated from coal! That makes electric vehicles in China “coal cars.”
Story of the Day
Bloomberg: Russian Oil-Product Stranded at Sea as Korea Cracks Down
Summary
Over two million barrels of Russian naphtha are stuck at sea as South Korean buyers avoid direct imports following a government investigation into the fuel's origins. This buildup significantly exceeds the earlier weekly average of 790,000 barrels. Russia was once South Korea's top naphtha supplier, but exports have been impacted by the Ukraine invasion and subsequent G7 price caps, leading South Korea to turn to Middle Eastern sources.