COMMODITIES 2025: Global fuel markets diverge as road demand peaks, jet climbs

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

Oil-based road fuels, once the mainstay of global oil demand growth, are experiencing unprecedented structural challenges driven by accelerating electric vehicle adoption and stringent decarbonization policies globally. At the same, oil-based jet fuel continues to outperform other major transport fuels as air travel outpaces the uptake of nascent sustainable aviation fuels in 2025.

Global gasoline demand is expected to peak in 2025 at around 28 million b/d, according to S&P Global Commodity Insights. This watershed moment reflects surging EV adoption and improving vehicle efficiency, particularly in China, the world's largest oil importer. Diesel demand may already be declining after hitting 29 million b/d in 2024. Electric vehicles are already displacing more than 1.5 million b/d of oil demand, a figure set to quadruple by 2030, according to the International Energy Agency.

"The continuing weakness in gasoil and gasoline use reflects a combination of a persistent macroeconomic malaise and longstanding structural substitution trends that are progressively undermining demand for liquid transportation fuels," the IEA said in its latest monthly oil market report.

In China, the world's second-largest oil consumer and the main engine of oil demand growth in recent years, the demand trajectory is a crucial inflection point. With policy-driven EV switching, more natural gas powering trucks, and as petrochemical demand weakness, China's gasoline demand will peak soon and diesel will follow quickly after, analysts believe.

Commodity Insights expects China's gasoline demand to peak in 2025 at around 3.8 million b/d. The IEA projects demand of the fuel to peak at 3.66 million b/d in 2024 and start to fall by 2.3% in 2025. China's gasoil and diesel demand is set to peak in 2027 at slightly over 4 million b/d.

"With a total oil demand tripling that of India's, the world's third-largest oil consuming nation, China is the only major developing country that is likely to see demand of gasoline and gasoil/diesel to reach a plateau at present or in the near future," said Kang Wu, global head of oil demand research at Commodity Insights.

Biofuels are also increasingly helping to decarbonize the transport sector, with output globally set to grow by 100,000 b/d to 3.4 million b/d in 2025, or 3.2% of total liquids demand, according to the IEA.

Jet lift

While traditional road fuel demand heads into decline, global jet demand is still growing after passenger numbers returned to pre-pandemic levels for the first time in mid-2023. The main driver of oil demand growth since 2021, average global annual jet/kerosene demand growth is forecast at around 480,000 b/d in 2024, slowing to a 300,000 b/d rise in 2025, driven primarily by Western Europe and China.

Although aircraft efficiency gains mean jet demand has been decoupling from air traffic growth in recent years, decarbonizing air travel remains challenging and costly. Analysts with Commodity Insights expect global jet demand to grow slowly in the coming years before peaking in 2029.

Despite strong growth from a low base, global production of sustainable aviation fuel reached just 1 million mt in 2024, according to the International Air Transport Association, a faction of the global jet market. Although expected to double next year, SAF output will still make up 0.7% of total jet fuel production, IATA believes.

Platts, part of S&P Global Commodity Insights, assessed SAF on a CIF basis in Northwest Europe at $2,032/mt Dec. 18, almost triple the value of conventional jet CIF cargoes.

Product margins

With waning demand for gasoline and diesel set to partly offset growth in jet, expected refining capacity expansions in 2025 are set to pressure refining margins and product cracks for transport fuels. Notable capacity additions from the new Olmeca refinery in Mexico and the Dangote plant in Nigeria are set to pressure gasoline cracks in the Atlantic Basin.

The mismatch is expected to accelerate the rationalization of global refining capacity, especially in the Eastern US and Europe but also in China.

"Refining margins are expected to enter a down cycle period and a return to mid-cycle margins will depend predominantly on the rate of refinery closures -- as opposed to the rate of demand growth, which could have been expected in past recovery cycles," according to S&P Global's 2025 Energy Outlook.

Globally, gasoline crack spreads are seen averaging $9/b and $6.9/b in 2025 and 2026, down from $13./b in 2024.

Goldman Sachs is more upbeat, however, predicting a $1-$2/b upside to current gasoline and distillate margins in the Atlantic Basin next year, helped by low inventories.

For jet, cracks are expected to hold up in the coming year, reflecting the more bullish demand outlook. Despite lower year-on-year crack spreads, with jet growth still expected to outperform other products, the jet-diesel global premium is expected to remain above an average of $1/b beginning in 2025 and lasting through the 2026 forecast, Commodity Insights predicts.

As transport fuels decarbonize globally, the incremental oil demand barrel will increasingly fall to LPG, naphtha, ethane, fuel oil, and petrochemical feedstocks.

On a total liquids basis, Commodity Insights estimates that 2025 world demand will increase 1.4 million b/d, up from the 1 million b/d increase in 2024. The difference between crude oil demand growth and liquids demand growth reflects increased demand for gas-based liquid feedstocks, other non-crude liquids and a drop in the direct use of crude oil.