Sinopec’s Profits Dive 36% as Electric Vehicles and Alternative Energy Cut Fuel Demand

Sinopec, Asia’s largest oil refiner, saw its net profit plunge 36.8% in 2025, hit hard by falling fuel demand and rising competition from new energy sources. The company reported a net profit of 31.8 billion yuan ($5.9 billion), marking a sharp decline amid a challenging market environment.

Fuel Demand Slumps Amid Alternative Energy Push

The drop in Sinopec’s profit reflects a deeper shift in China’s energy consumption patterns. Gasoline and diesel sales fell 2.5% and 9.1%, respectively, as electric vehicles and LNG-fueled trucks gain traction. Kerosene was the only fuel to buck the trend, with sales rising 4%, supported by a recovering air travel sector.

Domestic consumption of refined petroleum products shrank 3.6% year-over-year, mainly due to alternative energy sources cutting into traditional fuel demand. China’s road transportation fuels—gasoline and diesel—have yet to recover to the levels seen two years ago, when the nation emerged from Covid lockdowns.

Refining Margins and Production Trends

Sinopec’s refinery throughput dipped slightly by 0.8% to 250.33 million tonnes, equivalent to about five million barrels per day. Petrol and diesel production fell 2.4% and 9.1%, respectively, while kerosene output increased 7.3%, reflecting shifting demand patterns. The company expects refinery throughput to hold steady around 250 million tonnes this year.

Despite weaker fuel demand, Sinopec’s refining gross margin improved by 27 yuan per tonne to 330 yuan, thanks to better margins on by-products like sulphur and petroleum coke. But high import crude premiums and freight costs weighed on the overall profitability of refining operations.

Chemical Sector and Natural Gas Offset Some Losses

Sinopec’s chemical product sales fell nearly 10% to 378 billion yuan, driven by lower prices rather than volume declines.

However, ethylene production jumped 13.5% to 15.28 million tonnes, signaling robust demand in some chemical segments.

Natural gas production rose 4% to 1.46 trillion cubic feet in 2025, and the company expects a slight increase to 1.47 trillion cubic feet this year. This growth contrasts with stagnant demand for domestic refined oil products, suggesting a gradual energy transition underway in China.

Capital Spending Focuses on Expansion and Efficiency

Sinopec invested 147.2 billion yuan in 2025, with nearly half allocated to exploration and development.

Plans for 2026 call for similar spending, aiming to expand crude oil capacity in key regions like Jiyang and Tahe. The company is also focusing on natural gas projects in Sichuan and upgrading oil and gas storage and transportation infrastructure.

These investments hint at Sinopec’s strategy to boost efficiency and reduce costs amid a tough market. The firm plans to diversify crude sources and optimize procurement to manage weak refining margins and shifting demand.

The sharp drop in Sinopec's profit highlights how alternative energy is rapidly changing China's traditional fuel markets. As electric vehicles and cleaner fuels cut into gasoline and diesel demand, Sinopec faces significant challenges. Sinopec's focus on chemicals and natural gas, along with its strategic spending, is crucial as the energy landscape keeps changing.