China's Oil Demand Plunges as Electric Vehicles Take Center Stage

China's oil demand has taken a significant hit due to the rise in electric vehicle (EV) sales and plug-in hybrids, according to the International Energy Agency. The agency reported that EVs displaced 1.5 million barrels of oil per day in China during the second quarter of this year, nearly doubling expectations.

The growth in EV adoption is attributed to China's dominance in global battery-powered vehicle manufacturing, as well as disruptions in oil supply due to the ongoing U.S.-led war against Iran. The Strait of Hormuz, through which most of China's oil supply passes, has been partially closed, further exacerbating the decline in oil demand.

The IEA projects that Chinese demand will fall 4 percent, or 280,000 barrels a day, from 2025 to 2027. This decline is expected to be long-lasting, as the agency notes that large crisis-driven shifts can have persistent impacts on oil demand.