Currently, China is the second largest oil consumer in the world, after the US. China's oil consumption per capita rises until a certain point of development and then flattens out. However, while climbing, oil's consumption on a per capita basis has been much below from the US levels and other nations that are analysed at a similar stage of development. This is partly because China's energy consumption is different, as historically the country has depended more on coal and less on oil.

The sharp drop in oil prices since mid-2014 has been mainly due to supply glut, but the recent decline is oil prices has been mainly due to slowdown in the Chinese economy. However, actual consumption data indicates that oil demand had risen 5% in 2015, the fastest growth pace in three years. Therefore, it is more about where demand might move in the future that has filtered into market confidence. With the long-term forecasts, it is unlikely that worries of a sustained decline in Chinese oil demand will materialise.

This forecast is based on certain assumptions as the country's oil consumption intensity is not expected to converge to that of its peers. As oil is utilised in industrial production, the investment outlook will help. Hence a moderate growth in demand is expected. Nevertheless, there are other sources of oil demand, such as the transportation industry, which can boost demand for oil in coming years.

But China is facing a serious problem of smog and the authorities are trying to improve environmental condition. The government has heavily invested in alternative energy. Also, China is trying to be a leader in electric vehicle (EV) revolution. Therefore, even if the ownership of car increases, oil demand might not witness the same amount of increase.

Demand intensity for oil in China does not have more room to increase before it starts levelling off, mainly driven by the transportation sector. Even though if oil demand flattens, the consumption level will still increase alongside the economy.

"We forecast China to add over 5 million barrels per day to the global demand tally by 2025, accounting for roughly 60% of supply growth estimates over the same time frame. At about 15 million barrels per day, China's expected oil consumption ten years from now compares to current U.S. consumption - the world's largest consumer of oil - of 19 million barrels per day", says TD Economics.

Overall, worries that China's slowdown will have a sustained effect on its oil demand seem to have gone overboard. The slowdown in the economy in the last five years has still led to increase in fuel demand, and it is not expected to change in the future.