China has been the leading consumer of oil since the turn of the century. Morgan Stanley said that its oil consumption will peak in 2025 as it shifts towards the use of electric vehicles and trains.
Andy Meng, one of the analysts in Morgan Stanley said that China's oil consumption will reach its peak eight years earlier than market consensus. Morgan Stanley concluded that the reversal will be driven by a transportation model that is unique to China. The bank said that while most countries moving up the economic ladder show continued growth in oil demand from increased driving, mass-adoption of electric vehicles and high-speed rail in China will drastically reduce gasoline use.
If the bank's projection is accurate, it will drastically shift the oil market since it has relied on the country's demand which is more than a third of the world's demand growth since 1999. The bank of America and Royal Dutch Shell, said that an expanding body of research is painting a bleak future for oil, as rapid adoption of electric vehicles could mean global demand peaks by the 2030s which worries energy executives and investors.
Meng said that China will no longer be the growth driver of global crude demand and they believe that the refiners and petroleum stations are the largest potential losers, while the battery companies are likely to become the key winners.
According to the International Energy Agency, China's crude consumption will expand through 2040. Its largest energy produces, China National Petroleum, forecasted that the country's gasoline use will reach its peak five years before the oil demand does in 2030.
Morgan Stanley also said that the county's electric vehicle use will reach 6.4 percent as the decade ends it will continue to rise reaching 80 percent in 2040. The bank also added that the technology innovation pushed by the local battery companies might speed up the timeline.
China's high-speed rail transportation shows rapid growth due to the development of the rail network and the congestion in China roads. Morgan Stanley said that highways' share of passenger turnover fell to 27% last year from 55% in 2012. In the U.S., the figure was 87% last year. They also reported that electric vehicles and high-speed rail disrupt China's oil demand and the pattern has been ignored by most investors in developed markets as there is no such experience from any precedent. Tesla's plan to build a mega-factory in the nation is expected to boost the popularity of electric vehicles.
