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As of August 24, 2025, the global oil market is witnessing a paradigm shift that most forecasters failed to anticipate. China, the world's largest oil importer, is demonstrating in real time how demand can die—not from a sudden war or recession, but from a quiet, structural transformation in transportation and energy production. The latest data from the International Energy Agency (IEA) and independent risk management firm DNV suggest that the peak of global oil demand may already be in the rearview mirror, and China is the primary driver.
For decades, energy forecasters assumed that global oil demand would grow steadily until at least 2040, driven by rising incomes in developing nations. But China's aggressive push into electric vehicles (EVs) has shattered that assumption. In July 2025, new energy vehicles—including battery electric and plug-in hybrids—accounted for 58% of all new car sales in China, according to the China Passenger Car Association. That's up from 48% a year earlier and far above the 30% penetration rate that many analysts had predicted for 2025. The result: gasoline demand in China fell by 6% year-on-year in the first half of 2025, and the decline is accelerating.
This is not a temporary blip. DNV's latest Energy Transition Outlook, released in early August, now projects that Chinese oil demand for road transport will halve by 2035 compared to 2024 levels. "The speed of the EV rollout in China has surprised even the most optimistic forecasters," says Sverre Alvik, VP and Director of DNV's Energy Transition Outlook. "We are now seeing a structural decline in gasoline and diesel use that will have global ripple effects."
The IEA, which has long been the benchmark for global oil demand forecasts, has begun to shift its tone. In its August 2025 Oil Market Report, the agency noted that "global oil demand growth is now heavily reliant on sectors outside of passenger transport, as the EV revolution in China and Europe is eating into the largest single source of demand." While the IEA still expects a slight recovery in oil demand in late 2025 due to resurgent aviation and petrochemical use, its long-term outlook has been revised downward. The agency now sees global oil demand peaking at 103 million barrels per day (mb/d) in 2026, several years earlier than its previous forecast of 2028.
This revision is significant because the IEA has historically been conservative in its estimates of demand destruction. The shift reflects not only China's EV boom but also the rapid expansion of domestic renewable energy, which now accounts for 48% of China's electricity generation. As more coal and gas power plants are replaced by solar and wind, the oil used for backup generation and industrial heating is also declining.
The original article that inspired this analysis pointed to the US and Israeli strikes on Iran as a potential catalyst for oil price spikes, but the data suggests that the real story is more structural. Even before the Strait of Hormuz tensions, Chinese oil imports had already peaked in 2023 at 12.6 mb/d, declining to 12.1 mb/d in 2024. The Iran conflict, while disruptive, has only accelerated the shift by highlighting the risks of fossil fuel dependence. China's government has responded by doubling down on its "energy security" strategy, which includes ramping up domestic EV production and building up strategic petroleum reserves.
"China's message is clear: they don't want to be held hostage by oil price volatility," says Zhang Wei, an energy analyst at the China Petroleum & Chemical Corporation (Sinopec). "The EV transition is not just about climate; it's about national security. And that's why it's happening so fast."
For oil-exporting nations, the implications are stark. The traditional forecast that demand would remain robust through the 2030s is now in doubt. Saudi Arabia, Russia, and the US shale patch are
