The costs of competition in China’s oil market

The business models of refining incumbents face disruption from integrated new entrants

Oil market watchers are used to thinking about China as a downstream market—dependent on imports to meet three-quarters of its crude requirements and as a massive market for transport fuels gasoline, diesel and jet. To the extent that we tend to be aware of China as the producer of nearly a third of global manufacturing output, it is usually through indirect association, where a higher PMI might signal stronger demand for diesel or naphtha. But a new generation of mega-refineries coming onstream in China is putting these two worlds on a collision course. New entrants The quest for upstream integration lured private sector textile producers Rongsheng and Hengli into China’s refining sector. H