In September 2020, BP’s Energy Outlook presented a vision of a “rapid energy transition,” a scenario where global oil demand had already peaked due to the lasting effects of the COVID-19 pandemic.
The BP forecast held that sometime in our new year demand would fall to around 97 million B/D—some 3 million B/D short of pre-pandemic levels.
Obviously, things turned out quite differently.
The International Energy Agency (IEA) estimates that by the end of 2024 global consumption reached 102.8 million B/D, surpassing BP’s projection by nearly 6 million B/D. Instead of a rapid transition, the world got a rapid recovery.
However, BP’s 2020 report didn’t offer just one scenario.
It also floated a “business as usual” case where demand stabilizes near 100 million B/D for the next 2 decades before gradually declining to 95 million B/D around 2050. Unlike the earlier prediction, recent indicators suggest that this one may be holding up a lot better.
In November, the IEA estimated that global demand increased by only 920,000 B/D in 2024. That’s less than half of the 2.1 million B/D growth predicted at the start of the year and below the 10‑year pre-pandemic average of 1.5 million B/D.
The sudden slowdown has been widely attributed to fading post-pandemic demand, softening global economic conditions, and the rise of alternative energy technologies.
Nowhere is this pattern more evident and important to pay attention to right now than in China.
After 3 years of strict travel restrictions, China reopened its economy in early 2023. Crude imports popped by 10% to 11.3 million B/D, signaling that China, already the world’s top importer, was returning to its role as the prime mover of global crude demand.
This was conventional wisdom not long ago.
But throughout last year we saw the IEA repeatedly revise its annual growth estimate for China, cutting it from 410,000 B/D to just 180,000 B/D. This compares with China’s average demand growth of over 600,000 B/D per year over the past decade.
OPEC has clearly taken notice. Although not as bearish as the IEA, the organization announced in December that it now projects global demand to grow by just 1.61 million B/D in 2024, down from its July estimate of 2.25 million. China was not the sole reason for the downgrade, but it played a significant part: OPEC reduced its forecast for China’s annual growth from 760,000 B/D to 430,000 B/D.
The Electric Dragon
A slowing Chinese economy is certainly a key factor behind the downward projections, but it is only one part of the story here.
Vitol Group, the world’s largest independent oil trader, reported in November that Chinese demand for gasoline and diesel have stalled out.
“Future demand growth is almost entirely linked to petrochemical feedstocks—road fuels have already, or will soon peak,” Vitol concluded.
The China National Petroleum Corporation (CNPC) went a step further in December when it issued a report predicting peak oil demand on an absolute basis in China will happen this year—5 years earlier than CNPC’s previous estimate of 2030.
Such a development will be considered by many to be nothing short of a seismic shift in crude markets. For the past 20 years China has represented more than half of the world’s increase in consumption, amounting to about 16% of total global demand in 2023.
This comes as Beijing spent years aggressively pushing for the adoption of liquefied natural gas to fuel its trucking fleets and electric vehicles (EVs) to move its people. The broad effort is seen as aligned not only with the country’s air pollution and carbon‑reduction goals but provides a new layer of supply security in an uncertain geopolitical environment.
As a result of its policy and manufacturing prowess, the Asian nation of 1.4 billion is now the world’s leading manufacturer, buyer, and exporter of EVs.
In fact, with the help of EV sales, China has in about 4 years’ time ascended to become the world’s top exporter of all vehicle types, surpassing long‑time leaders such as Japan, the US, Mexico, and Germany.
China estimates that it now accounts for more than three-quarters of the global EV market after it sold more than 14 million units in the first 10 months of last year—about 30% of which were shipped abroad.
Nevertheless, China’s EV revolution is moving at such a breakneck pace that it has raised questions as to whether it can be maintained.
It has been pointed out that most Chinese EV manufacturers remain unprofitable and heavily reliant on government subsidies and incentives, some of which will expire in a few years.
Elsewhere, existing tariffs have been recently hiked to build moats for domestic manufacturers with US buyers facing a 102.5% tariff on Chinese EVs and most European buyers a 45% tariff.
These hurdles are designed to disrupt EV trade flows, but they are unlikely to hold back a shifting market.
In the US, EV sales climbed from just 2% of light-duty vehicle sales in 2019 to 9% in 2024. When hybrids are included, electrified vehicles accounted for approximately 20% of sales last year in the US and on a global basis as well.
The Takeaway
For those in the upstream oil and gas sector, the outlook may be more pragmatic than pessimistic. The global energy mix is indeed changing, but not uniformly. If China’s consumption has peaked, India—already importing more than 4.6 million B/D—will take its place as the world’s biggest source of new demand. According to the IEA, India’s imports may hit 5.8 million B/D by 2030 as its refining and infrastructure grow.
This seems to show us that if some producing nations hit a plateau, others could fill the gap and potentially keep global supplies near 100 million B/D for the foreseeable future. Yet forecasts are still being reassessed: BP, for instance, now expects 2050 demand to be around 75 million B/D, down from its 2020 forecast of 95 million B/D.
No matter which scenario plays out, holding production at current levels, or managing a smooth decline, will require steady and significant investment in both fresh projects and legacy fields.
Meanwhile, stepping beyond crude, the energy landscape is delivering positive surprises. Natural gas demand, once expected to grow steadily thanks to rising global power needs, is now set to be supercharged due to the proliferation of artificial intelligence (AI) data centers.
In the US, electricity consumption may jump more than 15% over the next 5 years—triple earlier estimates. EQT, ranked second among US natural gas producers, anticipates that meeting this need might call for nearly 18 Bcf/D of new supply by 2030, a prospect that may be echoed elsewhere as the AI boom spreads globally.
