Chinese consumers are getting behind the wheel more, spurring a heady increase in petrol demand, a sign that consumer spending is helping the slowing Chinese powerhouse achieve a soft landing, the IEA said today.
"Upending year-earlier forecasts that Chinese gasoline demand would struggle in 2015, confirmed data for the first ten months of the year show growth of roughly 10.4 per cent year-on-year" the International Energy Agency said in its monthly oil report.
Rapidly expanding gasoline demand, in contrast to weak gasoil/fuel oil, adds to "the increasingly compelling argument that the Chinese economy is undergoing a structural transformation - shifting from heavy manufacturing/exports towards a more domestically-focused economy," it added.
One of the key issues facing the global economy in recent years has been how to ensure a smooth transition of the world's second largest economy from an export powerhouse towards a more balanced model with higher domestic consumption.
Chinese growth hit a 24-year low of 7.3 per cent in 2014 and Chinese officials have indicated the trajectory is downward.
This is of concern worldwide as China has accounted for a major share of global growth in recent years, thus its slowdown could erase expansion elsewhere.
Even though the 3.3 per cent increase in auto sales from January to November is much lower than the 6.1 per cent gain during the same period in 2014, according to data released yesterday by the China Association of Automobile Manufacturers, that still means an additional 21.8 million vehicles have hit the nation's roads
Beijing reacted quickly to slumping sales earlier this year, cutting vehicle purchase taxes, resulting in record sales in November.
"Although the economic outlook grew more precarious in 2015, Chinese consumers maintained sufficiently high confidence levels to stimulate escalating vehicle usage," said the IEA.
And it isn't only cars. Demand for jet fuel rose by 19.1 per cent as more Chinese took to the skies.
"Such heady gains ... Proved more than sufficient to offset China's otherwise ailing industrial oil use."
In fact the IEA sees China's overall oil demand to increase by 100,000 barrels per day to an average of 13.0 million barrels per day, driven by demand for more petrol.
Despite world crude oil prices crashing to near seven-year lows under USD 40 per barrel, the IEA did not change its outlook that the increase in demand due to cheap fuel will gradually taper off. It held steady its forecast of increased demand of 1.2 mbd next year to 95.8 mbd, pointing to the first signs in a slowdown in demand.
