Global gasoline demand faces deceleration with the growth of electric vehicles

The trajectory of global petrol demand is set for a major deceleration in 2024, analysts predict, with growth potentially halving compared to previous years.

This shift, as reported by Reuters, is primarily attributed to the increasing adoption of electric vehicles (EVs) in major markets such as China and the US, alongside a return to pre-pandemic consumption levels following last year's bounceback.

Consultancy firm Wood Mackenzie forecasts the lowest growth since 2020, with demand expected to increase by 340,000 barrels per day (bpd) to reach 26.5 million bpd this year, down from the 700,000-bpd growth observed in 2023.

This trend is important as China approaches peak transport fuel demand, while the US has already surpassed it.

Sushant Gupta, an analyst at Wood Mackenzie, noted the role of electric vehicles in shaping demand dynamics, particularly in the US and China.

"Penetration of electric vehicles has been increasing in US and China,” he said, noting the impact on gasoline demand, with Chinese growth expected to be a mere 10,000 bpd this year due to higher EV uptake.

Concurrently, consultancy Rystad Energy projects global gasoline demand to reach approximately 26 million bpd in 2024, marking a slight increase of around 300,000 bpd from the previous year.

This growth, supported by the post-pandemic consumption surge, indicates a changing landscape where EVs are becoming increasingly prominent.

China, once a dominant force driving gasoline demand globally, is seeing a shift towards EVs.

The International Energy Agency (IEA) predicts that China will account for over half of all EV sales in 2024.

Despite this transition, gasoline consumption in China is expected to experience some growth.

Forecasts by the research arms of China National Petroleum Corp (CNPC) and Sinopec indicate an estimated increase in gasoline demand, with CNPC projecting a 1.3 per cent rise to 165.1 million metric tons (3.8 million bpd) and Sinopec expecting a 1.7 per cent increase to 182 million tons.

This growth comes while prices continue to fall, further stimulating demand.

Apart from China and the US, other regions like India and Indonesia are showing strong gasoline demand as car sales boom car sales amid low EV penetration.

India, in particular, is expected to achieve a fresh record in petrol consumption, with government estimates projecting a rise to 39.2 million tons (908,000 bpd) in the fiscal year ending March 2025, up 5 per cent from the previous fiscal year.

However, in regions like the US, where gasoline consumption is stabilising, refining margins are expected to face sustained pressure following the peak summer driving season.

The outlook for refining margins across various regions remains mixed, with Europe anticipated to experience both growth and challenges.

FGE forecasts a 2.3 per cent growth in European gasoline demand in 2024, consistent with recent years.

However, rising competition from Nigeria's Dangote refinery, along with stagnant demand in Europe, is expected to weigh on refining margins.

Wood Mackenzie warns that European refineries could face increased pressure due to competition from new entrants and geopolitical factors affecting market dynamics.

Despite the challenges posed by shifting demand patterns and geopolitical uncertainties, gasoline margins have exhibited resilience in certain markets.

Data from LSEG reveals an 85 per cent increase in gasoline margins across the US and Asia, driven by expectations of strong summer demand.

However, the European market faces its own set of challenges, with margins pressured by factors including competition from new refineries and geopolitical tensions.

(With inputs from Reuters)