Chinese refiners are building additional capacity, with the total expected to reach 19.7 million barrels per day by 2028.
The International Energy Agency (IEA) has forecast that oil demand will peak in 2028. It is not the first time that the IEA has predicted peak oil and the reason is the same as in previous forecasts: an increase in the adoption of electric vehicles which will reduce fuel demand. However, the new IEA report also mentioned another fact that is likely to make politicians in Europe and North America happy who want to ban internal combustion engines.
What the report highlighted is that China is becoming the country with the largest oil refining capacity in the world. This would make it the largest supplier of petrol and diesel globally, with the power to influence prices.
China exports refined petroleum products subject to quotas granted by Beijing, which acts according to the interests of the economy and domestic markets, rather than according to global markets’ indications.
The IEA itself has acknowledged China’s growing role as a global fuel supplier, noting that "our forecast on commodity balances depends heavily on China’s higher exports of products, especially diesel."
The IEA also noted that China has overtaken the United States to become the largest oil refiner in the world last year, but it doesn’t stop there. Indeed, Chinese refiners are building additional capacity, for a total of 19.7 million b/d by 2028. Of this, more than 3 million b/d will be spare capacity.
The presence of this spare capacity suggests that China may have plans to truly become the world’s largest fuel supplier, once European and American refiners close their facilities due to phasing out internal combustion engines or convert them into biofuel production plants. In fact, China knows that it is not possible to ban internal combustion engine cars and switch completely to electric vehicles.
China is not only the world’s largest oil refiner, it is also the largest market for electric vehicles. According to IEA forecasts, a total of over 155 million electric vehicles will be sold globally by 2028. More than half of these cars, the report added, will be sold in China.
China accounts for more than half of global EV sales. Yet, at the same time, oil refining capacity is increasing. At first glance, this may seem strange and perhaps even irrational. It may actually be a misjudgment and China could end up with several million barrels of idle and unusable oil refining capacity due to declining fuel demand.
On the other hand, may be the same strategy adopted by China in wind, solar and coal energy. In fact, China is also the world’s largest producer of wind and solar energy and is at the same time the country that builds the largest number of new coal-fired power plants. Government officials say China relies on all energy sources without distinction.
China will become the refiner of the world. The size of its exports will depend on what the ruling party decides to export. This means that China will have leverage control of global fuel prices, just like OPEC has leverage control of crude oil prices. Internal combustion engine bans in the European Union, Britain, and California could end up becoming a necessity rather than a fad of the transition. And even then, there’s no escaping dependence on China, the world’s largest producer and processor of battery minerals.
Original article published on Money.it Italy 2023-07-10 07:29:59. Original title: Petrolio, la Cina verso la leadership nella raffinazione globale
