Business Insider: Shift to electric vehicles reduces demand for China's oil

Oil demand in China has slowed considerably this year amid the country's transition to electric vehicles and natural gas, according to an analysis by Goldman Sachs, writes Business Insider.

Goldman forecasts a slowdown in China's oil demand growth of 0.2 million barrels per day in the first half of the year from the same period in 2023 and a drop in demand in the summer period. According to analysts, the shift from gasoline cars to electric and hybrid vehicles in China has reduced oil demand by 0.5 million barrels per day.

The electric vehicle sector has expanded rapidly in China, with three of the country's biggest electric car makers achieving record sales in June. According to a report last month, Chinese electric vehicle companies are catching up and even surpassing Tesla in terms of innovation, writes Business Insider.

In a previous report, Goldman analysts estimated that increasing sales of electric and hybrid cars will cause the use of petroleum products for road transport in China to peak in 2025, years ahead of most emerging market economies.

According to analysts, the slowdown in oil demand also draws attention to China's dependence on production. "While the oil demand data sends an overly pessimistic message about China's economic activity (the fuel switch does not reduce GDP), the overcapacity highlights the fragility of China's production bet," Goldman wrote.

The slowdown in oil demand comes at a time when China is experiencing a general economic slowdown, a struggling real estate sector and a sense of consumer distrust.

Earlier this week, the country's two stock exchanges stopped reporting daily data on foreign investor financial flows, a move that is part of a wider program to reduce real-time data reporting as the second the world's largest economy is in trouble, according to Business Insider.