The future of diesel in China
Diesel has been the most important refined product in China’s oil demand, accounting for a third of consumption in 2018 and for 25% of oil demand growth on average between 2008 and 2018. Historically, diesel was consumed in industry as well as in freight, fuelling trucks and commercial vehicles. But China’s industrial diesel demand has now likely peaked as the economy is shifting from an investment led economy to one driven by consumption. And while China’s future diesel demand is set to come from transport, mainly from freight as higher incomes and more e-commerce support demand for consumer goods, a combination of efficiency gains and government efforts to introduce substitute fuels in the transport sector will weigh. This paper will analyse the government’s clean transport plans and the extent to which they could weaken diesel consumption, as well as the implications for Chinese refiners, given the importance of distillates in their output thus far.