As I have been listening to the reporting about the deal between Premier Danielle Smith and Prime Minister Carney, the Memorandum of Understanding, I wonder one thing: where is the oil demand that will support another major bitumen pipeline? 

If you think it will come from China, most Chinese Petrochemical companies would disagree. As an example, some recent projections from CNPC, the state-owned oil company of China, suggest that the country’s oil use will peak in 2030. Other analysts have suggested that the peak will come sooner and plateau until 2030. However, after the 2030 peak, a substantial decline will occur which will project a consumption fall to around 2.28 billion barrels per year by 2050.

The reason for this is simple: China doesn’t want to be dependent on foreign fossil fuels or any one foreign source of any fossil fuel. If you want some evidence of this, just look at how the Australian coal market was devastated by an informal ban between 2020 and 2023. Specifically, back in 2019, Mongolia and Australia were the leading providers of coke coal in China. Then late in 2020, China informally banned Australian coke coal. According to S&P Global, while China has lifted its informal ban of Australian coal, Mongolia still provides about half of China’s coke coal. Or put differently,  China doesn’t want to be dependent on foreign fossil fuels or any one foreign source of any fossil fuel.

The importance of Chinese Fossil Fuel policy has two different consequences. The first is simple: as Chinese oil demand goes, so goes the rest of the oil market. As the IEA notes, “China was responsible for more than 60% of global increase in overall oil demand between 2013 and 2023”. Accordingly, as long as no new players come to the fore, Chinese demand drives the oil market. 

With this in mind, let us remember that China has indicated that they want to “zero-out” their fossil fuel use. The Chinese Government has said as much for almost the last two decades. In its most recent iteration it is called the “Made in China 2025”. With this in mind, it should not be surprising that China is using less oil. Or as the IEA has noted:

“…as the Chinese economy and domestic transport sector undergo significant transformations, demand for the most widely consumed oil-based fuels – including gasoline, jet fuel and diesel – declined marginally in 2024.”

Accordingly, as China electrifies, as China meets its own goal to replace as much of its domestic internal combustion fleet of terrestrial vehicles as it can and become the world’s leading manufacturer of terrestrial and aeronautical electric vehicles, their “fantasy” of transitioning to a domestically engineered, domestically sourced, economy is becoming a reality. If you want to understand what I mean, let’s go back to the  “Made in China 2025” policy. When first published in 2015, the Chinese Government indicates that it wants to move toward being a strong manufacturing power, and then move onto having an economy with a growing service sector. Such an economic model would be one that could increasingly handle and even foster higher levels of electric vehicles expansion into the transportation sector including but not limited to cars, light and heavy duty vehicles, shipping and aviation. All of this proffers a question worth considering: when will China reach its fossil fuel plateau? 

Or put differently, the speed of Chinese electrification likely will determine the future of oil consumption. Furthermore, whether oil consumption demand expands or contracts is dependent on its use. If in most developed countries, oil use in the transportation makes up about half of their oil consumption, one has to consider that a change in China’s behaviour will affect oil demand. This is even more true when one considers that about 40% of the world’s shipping traffic consists of shipping oil fossil fuel from point “a” to point “b”. Thus, the Memorandum of Understanding is dependent on China’s behaviour and a plateau in their oil demand determines the value of the Memorandum of Understanding between Alberta and Ottawa. The problem for both Alberta and Ottawa is simple: their assumptions of ever growing demand from “Asia” are not based on evidence. After all, there is a lot of evidence that indicates that there is a slowing or plateauing of oil demand in Asia, particularly China.

After all, when Premier Smith says that Canada can ship its oil to Asia, it presumes that there is a need for that oil; and lots of smarter people than I have said that there is no need for it. Singapore, as an example, like Iceland, Sweden and the Netherlands, has a strong enforcement regime as it comes to the phasing out internal combustion (ICE) car sales. To date, they have phased out diesel cars when it comes to taxis; and they are working towards their 2030 goal of eliminating the sale of all internal combustion (ICE) cars. Additionally, Indonesia has a goal of being a large electric battery producer. As it goes today, Indonesia could be the third-largest electric battery producer globally by 2027. To ensure that this will happen, the Indonesian government has welcomed Chinese EV manufacturers like BYD, SAIC and Geely Group to make it happen. Those brands are working to ensure that Indonesia’s goal is reached: to have 2 million electric cars and 12 million electric two-wheelers on the road by 2030. If you want to know how this is working, ask the traditional automobile makers. They are Japanese firms that have not taken up the mantle of electric car manufacturing; and, they – Toyota, Honda and Daihatsu – have seen a decline in sales in 2025. However, those are just small examples.

The five biggest importers of oil in Asia are China, South Korea, Japan, India and Kazakhstan; and by far, China is the largest. To put this into context, China imports more than 11 million barrels per day; while the other four combined equal the same. Or put differently, if China is not importing a lot of new supply, no one else will pick up the excess. Hell, you could include Oceania – Australia, New Zealand and a bunch of other island nations – in this simple analysis and you would get the same answer: if China is not buying more oil, a new pipeline will never see the light of day.

This gets us to our second point: there is no desire in China to become dependent on new sources of oil; especially those provided by “Western” sources. While, it is true that they use oil – and lots of it – they would rather control the source of oil and ensure that it is inline with their own economic and military desires. As a result, it should not be a surprise that China sources the majority of its oil from Russia, Saudi Arabia and Malaysia (a known hub for sanctioned oil from Iran and Venezuela). Do Danielle Smith and Mark Carney really think that Alberta oil will be substituted for those players?

With that being said, there are a number of other reasons why Chinese Officials are pushing away from fossil fuels. Domestically, China had a generational desire to reduce the amount of air pollution within their country. For those of us who are old enough to remember, newscasts from the 1970s, 1980s, or 1990s used to show Chinese cities with a smog-filled sky, a sky that had hues of red and brown in it; Chinese citizens would wear face masks to ensure that they would not cough on the pollution, smog and particulates. In the intervening years, those same citizens pushed for change, and they got some. In fact, this push from citizens was one of the few political signals that pushed China’s authoritarian and bureaucratic administrative state.

However, it does end there. As noted earlier, in realizing that they would not be able to beat Western Automakers, OEMs and parts manufacturers alike, the Chinese Government decided to try to leap frog the internal combustion (ICE) car; and become the leader in a variety of digital, manufacturing, robotic/autonomous, and electric technology. In this stead, one of the aims was to become a leader in  electric vehicle (EV) technology. Given China’s population, their bureaucracy argued that if they could become a leading manufacturer they would eventually have the scale to change the game. 

It turns out that this logic had merit. Instead of looking at the usual suspects, the usual battery-electric vehicles (BEV), let’s look at something different today: two-wheelers (2Ws), three-wheelers (3Ws), their electric variants  and low-speed electric vehicles (LSEVs) markets. According to the International Energy Agency (IEA), globally, the 3Ws market grew 13% in 2023, to reach 4.5 million sales. In that market, worldwide, there has been growth in the electric three-wheeler (e3Ws) market. Or put differently, in 2022, only 18% of the sales were electric. That has now grown to 21%. 

These mini-EVs have quickly become essential to transportation in lower-tier cities throughout China. Their user-friendly design, often not requiring a driver’s license, coupled with their affordability has made them an attractive option for many consumers. However, one can see this same trajectory from cars to boats and rail, airplanes to trucks; China is electrifying at a phenomenal pace. The problem for Alberta is that this pace is only quickening and it is driving electrification in Africa, Europe, South America and Asia; places that, for a variety of reasons, want to decrease their oil consumption and increase their domestic energy sovereignty.

With that being said, we can look to our own backyard to see that China will likely decrease their oil consumption. In China, they’re working on autonomous driving. Just like Waymo. Waymo claims to be the “world’s first autonomous ride hailing service”. They have a fleet of battery-powered electric cars. They operate in five American cities today. Though, they will be bringing operations on in 11 cities in the near future, and they have nine additional cities in development. Presently, Los Angeles and San Francisco are being served. However, if Waymo has no hiccups, more than 25 cities across three countries (including Tokyo, Japan, London, England and Buffalo, NY) will have an autonomous riding hailing service that exclusively uses battery-powered electric cars and primarily uses wind and solar energy. This is inline with what could happen in China. 

Given that Waymo finds that they are a wonderful “last-mile” fulfillment option for public transportation options, one can anticipate that in North America and Europe that Waymo customers will increasingly enter electrical driven bus and rail model, one can see that this is just one reason why fossil fuel demand (including coal, natural gas and oil) might not increase dramatically over time. Since electrification is further in China than it is here, that type of combination would indicate that a fall in oil demand is in the cards.

So, there we are. China is electrifying. They are doing so for a variety of reasons. From domestic sovereignty to environmental awareness, from economic independence to technological leadership, the Chinese Government has decided to change course, they have decided to move away from importing fossil fuels to increasingly depending on electricity. 

The problem for Alberta, for Canada, is simple: if China changes course, the demand for all types of oil will drop. From light sweet crude to shale oil to bitumen, whether oil consumption expands or contracts is largely dependent on the demand, the behaviour and the signals of a few countries; and China is one of them. Accordingly, the question about demand for Alberta oil, the one that started this diatribe, still remains outstanding. If we build another pipeline, will customers come? 

Increasingly, it has become clear that there is little economic demand in Asia for a pipeline. As the words above have shown, China is moving toward “zeroing out” their fossil fuel use. However, China is not alone. Pakistan and India, as has been documented by several media sources, have been adopting solar, wind and/or energy storage to transform themselves. Lucky Cement, as documented by the Financial Times, is just one Pakistani company that had started using solar and found it so economically compelling they are trying to add an energy storage solution. 

India is electrifying its bus network and its two and three wheeled vehicles. While the Agariyas – poor traditional salt farmers in the Indian state of Gujarat – have started to change their methods of production. It used to be that they were poor because the cost of the inputs would consume almost all of the profit. However, they have recently switched their methods replacing diesel powered pumps with solar powered ones. The change has empowered them, and provided them with more money and resources. From South Korea to Japan, India to China, we are seeing the electrification process change entire communities; and, at varying rates, all of them are replacing oil for electricity.

With all that in mind, one question remains: where is the evidence? Alberta and Ottawa, Premier Smith and Prime Minister Carney, making assumptions that ignore the undeniable reality that the world’s largest oil importer is actively and successfully pursuing a strategy to reduce its fossil fuel needs for geopolitical, economic, and environmental reasons. Premier Smith and Prime Minister Carney are not choosing to witness the change that is going on, and just want to talk about “Asia’s ever-growing thirst for oil. Like cellphones three decades earlier, Asia is on a different path. They are choosing to eschew the path of endless fossil fuel consumption for the hope of electrification. The only problem for Canadians, for Albertans, is that our politicians are not recognizing this. Our politicians, Canadian Politicians, are forcing us to go down a path which will pit the majority against individuals and various minorities, which will pit old against young, which will pit those who depend on the social safety net with those who pay for it. I believe that the policies that we create should provide the greatest good for the greatest number, while protecting the individual, the minority or the few. It should be clear that this pipeline doesn’t do any of that. The MOU doesn’t provide answers, it merely encourages division, hides the evidence and the eventual reality: Canada needs to change. That change is inevitable because sooner rather than later, we will find that fewer people want to purchase our bitumen.