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Amid the doom and gloom of the crude oil market, which looks like this tumultuous year may end with prices lower than where it started, there is one glimmer of hope: China.

The country consumes roughly one in six barrels of oil globally and has bounced from lockdown to lockdown for most of this year as it tries to maintain Covid Zero. Now that the policy has been recklessly derailed, we are sure to see an instant surge in demand comparable to what happened when the rest of the world reopened in 2021, leading to a glut in the energy market.

Up to a point. But if we assume a direct correlation with other countries, we risk misunderstanding the important ways in which China consumes oil.

First of all, transportation is not as dominant as elsewhere. Gasoline, diesel and jet kerosene consume 72% of a barrel of oil in the US and 68% in the European Union. In China, it is only 54%. Petrochemicals, broadly defined to include anything that is not a liquid fuel, account for another quarter of a barrel in the US and Europe. In China it is 42% (1)

That should debunk the notion that 2022 was a tough year for China’s oil demand. Gasoline and jet fuel output, as one would expect from the shutdowns, has fallen. In the 10 months to October, 146 million tonnes were consumed, down 17 million tonnes from 2021.

Other products, however, have risen in line with the rising value of export trade. When foreign countries buy more Chinese goods, it tends to be for increasing plastic raw materials used in their production, as well as for diesel fuel used to transport goods from factory to port, run generators in industrial plants and for electricity. ships transporting goods to foreign ports.

In the same 10 months, the production of LPG, oil and ethylene raw materials amounted to 112 million tons, 9.1 million tons more than the previous peak. Diesel consumption was 153 million tons, up a whopping 23 million tons (possibly due to some change in how China’s statisticians define diesel).

In fact, the only factor that prevented China’s crude oil consumption from hitting a new record this year was a sharp drop in asphalt production. Production through October was down 16 million tonnes from a year earlier, almost a third less than total demand for any other single commodity. It is parallel to the bust of the country’s real estate sector. bitumen is mainly used to surface roads that connect new property developments to cities, as well as building materials such as roofing.

Oil demand is always a more complicated story than a straightforward relationship between driving behavior and crude consumption, but China has it more than any other major economy. Petrochemicals are not only a large share of the barrel, but a sector of the state of exports and therefore demand outside of China. Even diesel, which is the biggest chunk of the barrel, has less exposure to vehicles than in other countries, thanks to its role in powering chemical plants and powering on-site generators in the vast construction industry.

That’s reason to think that even a quick lifting of Covid-Zero restrictions now won’t be enough to trigger a sudden recovery in demand early next year. This will require an improvement in global growth as well as a change in China’s domestic conditions. Don’t hold your breath. The US Federal Reserve continues to raise interest rates to address lingering signs of inflation, and the World Trade Organization predicts a sharp slowdown in trade next year, with trade growing by just 1% from 3.5% this year.

This is consistent with where major forecasters see things. The Organization of the Petroleum Exporting Countries expects oil demand to continue to fall by about 55,000 barrels per day in the first quarter of 2023 before picking up for the rest of the year as travel resumes alongside resilient crude demand. The International Energy Agency believes consumption will run relatively low compared to 2019 until the middle of the year, when it should finally surpass 2019’s highs.

This is a sign that China’s long run as the engine of oil growth is coming to an end. Apparent domestic oil demand has not expanded significantly since peaking in early 2021. Exports from the country’s refineries and factories accounted for most of the increase in consumption this year. India, which consumes about one barrel for every three used in China, is often a more important contributor to marginal demand these days. A nation that has long viewed its dependence on foreign oil as a national security threat may be on the verge of abandoning that habit.

More from Bloomberg Opinion.

• China’s post-Covid reopening carries risks. Julian Lee

• Be careful, here are the predictions for 2023. John Otters

• China’s new leadership hints at a slower future for commodities. David Fickling

(1) This “other” category also includes oil used in refineries and refining profits, which is not strictly speaking a product, but a statistical anomaly.

This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.

David Fickling is a Bloomberg Opinion columnist covering energy and commodities. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.

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