Driving Forces Behind the Transformation of China Refined Oil Market: Marketization, Eco-friendliness, Digitalization and Urbanization
According to GL INFO's observation on relevant policies and the cluster analysis of industry trends, the future development of China oil product market is summarized into four major directions: marketization, eco-friendliness, digitization and urbanization. These four trends will join forces to influence China oil product market policy, market structure, consumption structure and profit model.
The biggest driving force behind the marketization is the overcapacity. Under the premise of guaranteeing energy supply security, oil product marketization would be further advanced to pave the way for the debut of oil product futures, and to unleash the domestic demand for crude oil futures. However, marketization doesn't mean unrestraint; on the contrary, compliance costs and standardization requirements will become higher. This is a challenge to corporates' operation management and risk control. Tracing back to the marketization process of developed countries, the biggest challenge for private business is the de-channelization and value maximization of the business ecosystem.
Taking into account of oil capacity development trend, GL INFO estimates that China total refining capacity would hit a new high in 2024 at 1 billion tons per year. The gasoline demand would reach its peak in 2028, while the diesel demand already climbed to the top in 2016. The continuous increase in refining capacity during China's 13th and 14th five-year plan periods and the slowdown in demand growth of gasoline and diesel exacerbates the supply surplus in China oil product market and rising export volumes.
China has the world's latest netizen population. Digitization has already accelerated to infiltrate traditional energy industry, dramatically changing China's crude oil market as it catches up the developed countries. A more centralized demand for gasoline and diesel is boosted by the development of ridesharing and data platforms such as sharing bicycles and cars, Didi Taxi and other big-data relevant applications. Thus, the traditional energy industry begins to explore new area of growth in profit in the new economy, including winning in the last mile, or forming quantitative retailing sales strategy with the help of AI deep learning. Some state-owned enterprises have quietly established the IOT big data platform for their supply chain management.
Urbanization will drive a sustainable development of China economy and oil products demand. It will also result in the cascading development of China gas stations. More developed regions are seeking innovations in profit model and breakthroughs in efficiency after the demand peaked. Newly and originally acknowledged first-tier cities, as the mainstay of demand, also provide more room for innovation when they expand. We can see new driving factors behind the changing tendency of interprovincial consumption of gasoline and diesel, along with the rise of second and third-tier cities as the emerging forces.
The focus of China oil product market analysis also has been shifted from supply side to consumption side. The demand analysis, such as market opportunity, market size, affordability, consumption habits and consumption trend, will be the core of business planning and competitive positioning. Except for traditional consumption pattern, technological innovation and breakthrough also bring profound influence on consumption tendency.