OREANDA-NEWS. June 05, 2013. Transportation rather than industrialization is now in the front seat when it comes to driving China's oil demand growth, according to an industry analyst.

So while Chinese economic growth rates might be slowing, its consumers are becoming wealthier and pushing up gasoline demand, which is up 15% year to date, while gasoil consumption remains flat, Bernstein Research said in a report.

Demand for oil in the transportation sector has now reached 46%, compared with only 30% a decade ago, the report said.

Chinese official data compiled by Platts shows China's gasoline demand averaged 2.2 million b/d over January-April, up 13% from a year ago, while gasoil demand at 3.5 million b/d showed a 1.1% dip. Total Chinese oil demand averaged 9.96 million b/d over the first four months, 2.8% higher than a year ago.

By 2020, Bernstein expects China's vehicle parc (vehicles in use) to double to over 220 million, or 25% of the US on a per capita basis, the report said. In other words, China would have 200 vehicles per 1,000 persons, compared with 800 vehicles per 1,000 in the US.

While China's National Development Reform Commission has set out fuel efficiency targets and promoted electric and natural gas vehicles, "the targets are not ambitious and since they are weight-based, appear to encourage automakers to sell more SUVs," Bernstein said.

The Chinese government is targeting a 50% improvement in vehicle fuel consumption per liter per kilometer by the end of the decade -- a standard between the US and EU -- which the report said "is arguably not ambitious since the average vehicle size on China's roads is nearer European levels."

Meanwhile, the shift toward SUVs, which is the fastest growing sub-segment of the passenger car vehicle, will mean that the fuel efficiency of the average new passenger car may only improve by around 12% over this period, and the average fuel efficiency of the fleet only by 9.1% by 2020, the analysis that Bernstein referred to as "SUV Mania" in its title concluded.

By 2020, SUVs could account for almost 20% of China's passenger fleet compared with 10% today, justifying Bernstein describing it as "SUV mania" in the title. Electric cars, in contrast, "look set to remain an irrelevance" at less than 1% of the total fleet, as government efforts to encourage such vehicles stall in the face of limited consumer acceptance, the report said.

With China's auto sales continuing to remain strong, Bernstein analysts remain upbeat on oil demand growth, predicting that it would rise to 11.3 million b/d by 2015 and 12.9 million b/d by 2018, well above other forecasts.