China’s frantic race to buy EVs a lesson for Alberta if it will listen

Alberta’s resistance to accept energy transition realities stands in stark contrast to China

Peak gasoline demand in China will arrive in just a few months with peak diesel demand following in 2025, according to BloombergNEF, and the cause is the rapid electrification of transportation. Global peak oil demand this decade is looking more and more likely. Alberta, take note.

Because there are always skeptics about peak oil demand predictions, who’s making this call is important: China Petroleum & Chemical Corporation, commonly known as Sinopec. The parent company, Sinopec Group, is the world largest refining, natural gas, and petrochemicals conglomerate. It’s also owned by China’s government. `

As the largest gasoline and diesel retailer in a country of 1.4 billion people, Sinopec keeps close tabs on markets trends, including the remarkably rapid pace at which China is adopting electric vehicles.

March of the Electric Car in China

  • Two and three wheelers, very important to transportation in Asia: 70% of kilometres travelled already electric
  • Passenger vehicles: 38% of new car sales and already 5% of the national fleet
  • Commercial vehicles: 12% of light commercial vehicle sales and 4% to 5% of medium and heavy commercial vehicle sales
  • Electric buses: 600,000 in service

And China is just getting started. Within three years, over half of all new cars sold will be electric.

Source: BloombergNEF 2023 EV Outlook.

Declining Chinese Oil Demand Not Far Off

Five years ago I interviewed economist Ed Rawle of Wood Mackenzie about his peak oil demand forecast. His clients include many of the world’s largest oil companies. All of them, he said, accept that peak demand is coming, but what happens after that is of most interest to CEOs.

“They want to know, where do we sit on the cost curve in that new world? Not only the peak, but the timing around the drop off beyond the peak,” he said. “And what is the shape of that peak? That’s really important and there’s a huge amount of uncertainty around that.”

Uncertainty hasn’t disappeared, but BloombergNEF’s demand curve for China’s road transport (above) gives an inkling of what lies ahead. 

The shape of that curve is determined not just by the number of electric vehicles on China’s road, but the number of kilometres travelled compared to internal combustion engine vehicles. 

Ride hailing provides an insight. EVs have cost more to buy, but have lower costs per kilometre, which is ideal for taxis and ride hailing. Almost two dozen cities “require new ride-hailing vehicles to be either battery-electric, plug-in hybrid or fuel cell-powered,” according to BloombergNEF. Policy and economics have combined to push EVs to almost 40 per cent of China’s ride hailing fleet.

China’s frenetic switch to electric transportation is one of the reasons why Europe and North America are rushing to catch up. Expect the wealthy economies to transition first. But middle income and emerging economies won’t be far behind. China is beginning to export cheap EVs more suitable to markets like Latin America and solar panels combined with microgrids make the EV infrastructure more affordable and easy to build.

The decline curves (see below) from BloombergNEF’s 2023 EV outlook are beginning to look conservative only a few months after being released.

Why is China’s rapid shift to electric transportation important for Alberta? Canada is the world’s fourth largest oil producer behind the United States, Russia, and Saudi Arabia, according to the US Energy Information Administration. Alberta produces 70 per cent, about 4 million barrels per day, of national output. On its own, Alberta would rank eighth, below the United Arab Emirates and ahead of Brazil. 

Last year, Canada exported $201 billion CDN of oil and gas, according to Statistics Canada, almost all of it to the United States. For comparison’s sake, autos and parts, number two on the list, was only $65 billion CDN.

Alberta matters. And how it responds to trends like peaking oil demand in China matters a great deal.

I argued in this column, however, that Alberta’s political, business elites have misread the global energy transition, that “there is no plan for Alberta to compete in a fast [energy] transition scenario” and “hoping for the best while ignoring the worst is a very poor strategy.” This latest news from China makes a pretty compelling case for a fast transition. 

Just a suggestion, but perhaps Alberta’s Premier Danielle Smith and major oil company CEOs should pause their political squabbles with Ottawa long enough to recognize that the markets for their chief export are rapidly changing.


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