In China, SUVs fuel consumer demand for energy

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In September, Lu Dan, a typical Beijing resident, spent $37,500 on a brand new Nissan X-trail, the Chinese name for the Rogue. With the purchase, the 36-year-old suddenly joined an army of Chinese consumers whose affinity for SUVs is remaking the world's biggest auto market, and may even hold some hope for oil producers starved for new energy demand.

Mr. Lu, in other words, may be Calgary's new best friend.

For most of the past decade, China has been the driving force behind growing world oil use. Its soaring economy sucked up ever-greater numbers of barrels, and last year it became the top global importer of crude. But its economy is slowing rapidly, and with it, energy use. Demand for diesel, the fuel of the industrial economy, is at its lowest point in 13 years. China may have actually pumped less diesel in 2014 than it did a year earlier.

But there may yet be hope for the country's energy demand, and it lies in people like Mr. Lu, a researcher who studies lasers for telecommunications. In buying the X-trail, he not only bought one of the hottest-selling vehicles in the country – with sales up nearly 10-fold over last year, it's marketed with lines like "driving wildly at full speed" – but he also joined the masses buying fuel-loving SUVs, which are selling in such great numbers that their gas tanks more than make up the ground lost by a weak industrial sector.

Though the International Energy Agency has warned that China "has entered a less oil-intensive stage of development," it at the same time had to make a surprise 215,000-barrel-a-day boost to its Chinese September demand figures. Far from plunging, China's implied oil demand in November was the second strongest on record, and up 3.3 per cent over the previous year.

Part of the reason is China's opportunistic buying of oil to fill its strategic reserves, as the nation sucks up everything it can to fill giant emergency tanks at low prices. But it's clear Chinese drivers are doing their part, too, as soaring gasoline demand (up 16 per cent in the first quarter) more than makes up for flat-lining diesel.

The trend is reflected in the most recent numbers from the China Association of Automobile Manufacturers, which show December commercial vehicle sales down 9.2 per cent relative to last year. Meanwhile, passenger car sales for the first 11 months of 2014 were up 9.2 per cent, thanks almost exclusively to the huge demand for big vehicles. SUV sales were up 34.1 per cent, while minivans soared 48.7 per cent.

It's not just a local phenomenon, of course. 2014 marks the first year SUVs and their sibling crossover vehicles outsold sedans in the United States, and IHS Automotive research shows global SUV sales up 88.5 per cent from 2008 to 2013.

But no other country can match China, where SUV sales rose 480 per cent in that period. As recently as 2011, China bought 1.59 million SUVs. In 2014, it's expected to have moved 3.9 million of them, a number that has real consequences. A 2005 study found that in the U.S. alone, SUVs added 440,000 barrels per day of crude demand, compared with the needs of mere cars. Though the market is different today, with a greater prevalence of smaller models, SUVs still use more gas than cars.

China's new generation of SUV buyers isn't much concerned, though. Take Mr. Lu, who doesn't have a child but is thinking ahead, and wanted a vehicle that would eventually fit a car seat and the luggage demands of an expanding family.

The X-trail has downsides, he acknowledges: "An SUV is harder to drive than a normal car, like when you have to turn or cross a bridge," he said. "When I first bought it, I was a bit scared to drive it because it's so big." But it's got some pretty serious advantages, too, when it comes to showing the neighbours what's in your parking spot. "People think driving a bigger car gives you face," Mr. Lu said.

Plus, many just find those high seats easier on the back. That's no small consideration in Chinese traffic, which in many cities makes molasses look speedy.

"Why would I buy a car in traffic like we have in Hangzhou? I can't drive fast," said Wu Tao, who is deputy director of the Audi Q3 Owners club in the city near Shanghai.

"A car is far less comfortable than an SUV."