Evaluating the Impact of Fossil Fuel Vehicle Exit on the Oil Demand in China

Abstract

Vehicle ownership is one of the most important factors affecting fuel demand. Based on the forecast of China’s vehicle ownership, this paper estimates China’s fuel demand in 2035 and explores the impact of new energy vehicles replacing fossil fuel vehicles. The paper contributes to the existing literature by taking into account the heterogeneity of provinces when using the Gompertz model to forecast future vehicle ownership. On that basis, the fuel demand of each province in 2035 is calculated. The results show that: (1) The vehicle ownership rate of each province conforms to the S-shape trend with the growth of real GDP per capita. At present, most provinces are at a stage of accelerating growth. However, the time for the vehicle ownership rate of each province to reach the inflection point is quite different. (2) Without considering the replacement of new energy vehicles, China’s auto fuel demand is expected to be 746.69 million tonnes (Mt) in 2035. Guangdong, Henan, and Shandong are the top three provinces with the highest fuel demand due to economic and demographic factors. The fuel demand is expected to be 76.76, 64.91, and 63.95 Mt, respectively. (3) Considering the replacement of new energy vehicles, China’s fuel demand in 2035 will be 709.35, 634.68, and 560.02 Mt, respectively, under the scenarios of slow, medium, and fast substitution—and the replacement levels are 37.34, 112.01, and 186.67 Mt, respectively. Under the scenario of rapid substitution, the reduction in fuel demand will reach 52.2% of China’s net oil imports in 2016. Therefore, the withdrawal of fuel vehicles will greatly reduce the oil demand and the dependence on foreign oil of China. Faced with the dual pressure of environmental crisis and energy crisis, the forecast results of this paper provide practical reference for policy makers to rationally design the future fuel vehicle exit plan and solve related environmental issues.