Canada is among the oil-producing jurisdictions that may have to revise their strategic market assumptions, as several signals point to a permanent structural decline in Asian demand for petroleum products.
China “has overtaken the Americas to become the world’s biggest oil-consuming region, accounting for almost 40% of global demand,” Reuters notes. That development early in the decade fueled corporate dreams of pipelines delivering crude from resource-rich interior regions of North America to terminals up and down its Pacific and Atlantic coasts.
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But the basis for the dream is fading, the agency reports: “Thomson Reuters Eikon data shows that Asian crude oil tanker imports have fallen, albeit from record levels, for four straight months, and by 12% since March, to around 20 million barrels per day, slightly below last year’s levels.”
One reason for the drop is that China has about finished filling its strategic petroleum reserve. But another is what appears to be a permanent slowdown in the pace of economic growth in the country, and a knock-on decline in car sales. With domestic fuel sales not matching their expectations, Chinese refiners are putting surplus gas and diesel on the global market—further bloating a supply glut in those commodities.
Long-term trends in Japan and Korea, the Pacific’s other two major oil consumers, also point to a permanent decline in regional demand. A shrinking population, a saturated car market, and efficiency improvements have reduced Japan’s oil consumption from 6.0 to 3.5 million barrels per day. India, Asia’s other demographic superpower, has not taken to car ownership as fast as some observers expected. And everywhere, rising fuel efficiency standards are cutting into the growth of gasoline and diesel sales.