Car dieselization: A solution to China's energy security?

Abstract

Recently, there is a renewed interest in car dieselization in China to address the challenge of oil security. We developed an econometric model to estimate the vehicle fuels and crude oil demands. The results indicate that if the average travel distance of cars is maintained at the level of 2010–16,000km/yr, and if the distillation products mix of the refineries remains unchanged, China's crude oil demand in 2020 will reach 1060milliontonnes (Mt), which also results in an excess supply of 107Mt of diesel. A new balance of diesel supply and demand can be reached and crude oil demand can be significantly reduced to 840Mt by improving the production ratio between diesel and gasoline on the supply side and promoting passenger vehicle dieselization on the demand side. The crude oil demand will be reduced to 810Mt in 2020, if the vehicle travel distance gradually drops to 12,000km/yr. If so, dieselization will provide a rather limited added value—only 6% further oil saving by 2020. Dieselization is not a silver bullet but it depends on a series of key factors: growth rate of gross domestic products (GDP), vehicle sales, and vehicle annual travel distance.