Ann Arbor (Informed Comment) – The International Energy Agency signaled last week that the rate of increase in world petroleum demand fell in the second quarter of 2024 to an 18-month low. The increased demand was only 710,000 barrels a day.
The world used 102.04 million barrels per day of petroleum as of May. That figure has to be brought down to zero by 2050 if the world is to avoid the climate going batshit crazy and posing a challenge to civilized life. It is therefore disappointing that demand grew 710,000 barrels a day in the second quarter of this year. We want to see it decline. But the increase was still much less than historical trends would have predicted.
Why the reduced rate of growth? The IEA largely fingered China, saying that its post-COVID recovery has run its course and its gdp growth is slowing. China is the world’s second largest economy, and it trucks around an enormous number of goods from factories to marketplaces and to ports for export. When it trucks fewer goods because of reduced demand, China requires less petroleum. Although its imports of oil rose in Q2, they rose at an anemic rate compared to the previous year. April and May likewise saw a slowing in Chinese petroleum imports.
But the erosion in Chinese petroleum demand is not only owing to its slowing economy. The IEA projects that fully 45% of the automobiles sold in China this year will be electric. Chinese economists are predicting that by next year, so many vehicles on the road will be electric that petroleum demand will start falling. Not just the rate of increase, as with this year. The number of barrels of oil brought in will be less than in 2024, and will be less yet every year thereafter. We are on the cusp of the end of the oil bubble that dominated the past century.
CNBC Int’l Video: “We’re seeing a clear slowdown in oil demand growth, says IEA”
Most petroleum is used to power vehicles. The decline of Internal Combustion Engine (ICE) vehicles equals the decline of oil demand.
Bloomberg NEF predicts that EV sales will triple in 2025 globally, with over 20 million units sold.
The EVs already on the road have reduced global petroleum demand by 1.5 million barrels a day. By 2025 these vehicles will displace 2.5 million barrels a day. It is not only in China that petroleum demand will begin declining. That trend will start next year in China, but by 2026, demand will fall globally.
China has gotten ahead of the United States in EV technology and is able to produce electric cars for half the price of the average US EV (the average such vehicle in the US costs $55,000).
China, according to AP, manufactured “62% of the 10.4 million battery-powered EVs that were produced worldwide last year.” The US only produced about a million, some 10%. Since the auto industry is a leading sector of advanced economies, China’s vast superiority here is a national security threat to the United States. Many US observers are petrified of what would happen to the US Big Three if China follows through with plans to open an EV manufacturing plant in Mexico, to take advantage of NAFTA. Although the US can block that move with tariffs, it would be better if US industrial policy put the Big Three on a better foundation to compete with the Chinese EVs.
The US backwardness in this sector is also a drag on our fight against carbon dioxide-driven global heating, which is baking much of the country and intensifying hurricanes that threaten the Gulf and Atlantic coasts. If Trump gets in and guts the US EV market, as he pledges, he will be dooming us to Third World status in the foreseeable future.
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