China on the move: Oil price explosion?

Rapid expansion of highway and jet traffic in China has created a surge of demand for oil products, putting pressure on world energy markets and petroleum product prices. This paper examines trends in freight and passenger traffic to assess how growth in Chinaʹs transport demand relates to growth in Chinaʹs economy, as well as the energy intensity of transport. Based on assumptions about demand elasticity and energy intensity, a range of scenarios is developed for Chinaʹs oil demand through 2020. Incremental oil demand from Chinaʹs transport sector is then compared with world oil demand projections to assess the likely impact on world oil prices. The finding is that new demand from Chinaʹs transport sector would likely raise world oil prices in 2020 by 1–3% in reference scenarios or by 3–10% if oil supply investment is constrained.