Cratering oil use in China shows the death spiral that could end oil

Key Points:

• In Q2 2024, China experienced a significant 9% drop in overall oil use and a 16% decline in transportation oil consumption, leading to a 1% reduction in CO2 emissions despite increased coal use, marking a rare instance where lower oil use drove emissions decline.
• The reduction in oil demand is largely attributed to a boom in electric vehicle (EV) adoption and increased public transit usage, with EVs displacing more oil than the entire UK used in the first half of 2024, signaling a shift towards more efficient transportation in China.
• Sinopec, China’s state-owned oil company, now believes Chinese oil demand peaked in 2025, earlier than previously predicted, which could have major implications for global oil markets given China’s status as the world’s second-largest oil consumer.
• China’s per capita CO2 emissions and oil consumption have peaked at significantly lower levels than the US, demonstrating that a major developing economy can reduce emissions while continuing to grow economically.
• The decline in oil demand driven by EV adoption could trigger a "death spiral" for oil markets, where lower demand leads to lower prices, reducing incentives for oil exploration and production, potentially keeping more oil reserves untapped and benefiting the environment.