The global crude oil market is entering a challenging period. A mass transition to electric vehicles in China could fan the flames. If this scenario unfolds, experts warn the oil market could collapse.

The mass adoption of electric vehicles in China could potentially deal a serious blow to the oil market. However, experts reckon that such a scenario is unlikely for the time being. Nowadays, in China, which accounts for 41% of global commodity demand, most people are switching to electric vehicles. As a result, gasoline demand is expected to decrease dramatically in the near future. Nevertheless, skeptics argue that this is a long-term issue. So, demand will remain largely unchanged in the short term.

According to estimates by the World Energy Institute, China’s oil import peak will occur in 2025. After that, China will phase out its imports of petroleum products, analysts add.

Financial strategists at BitRiver largely agree with this view. They note that fuel demand in China began to decline earlier than previously expected. In the first ten months of 2024, crude oil imports shrank by 3.4%. This should be treated as a worrying signal for commodity suppliers.

The current situation has perplexed global hydrocarbon markets. Against this backdrop, OPEC and its allies extended oil production cuts, although they had not planned to do so back in October 2023. Moreover, demand forecasts for petroleum products for 2024 and 2025 were further downgraded.

However, specialists believe a full transition to electric vehicles is still far off. Technological hurdles, such as complicated battery production and recycling, remain major obstacles. According to expert forecasts, a large-scale downturn in the oil market will hardly happen. The reasons include high demand for crude oil in the petrochemical industry and a steady interest in aviation fuel among most companies.

Importantly, OPEC recently lowered its forecast for oil demand growth. This trend has been observed for the fourth consecutive month. According to the cartel’s estimates, hydrocarbon consumption in 2024 will amount to 104 million barrels per day.