China's largest oil refiner, state-owned Sinopec, is seeking to reshape its business as domestic fuel sales weaken amid the electric vehicle boom. The planned pivot highlights how electrification in the world's largest car market is pushing refiners to look beyond gasoline and diesel for growth.

China Petroleum & Chemical Corporation, the company's formal name, plans to allocate more capital to new energy and chemicals by the end of the decade in an effort to grow revenues and profits as China's domestic fuel sales fall to their lowest level in nearly a decade.

"As the company grows in scale, its ability to respond to market changes becomes inadequate, and the 'big company syndrome' remains to be overcome," Sinopec chairman Hou Qijun, who took the role a year ago, wrote in a magazine published by China's State-owned Assets Supervision and Administration Commission (SASAC), Reuters reported.

Over the weekend, Sinopec reported higher net profit for the first half of 2026, but also flagged declining domestic fuel sales, which have weighed on earnings for two years.

"Due to the dampening effect of high oil prices on demand and accelerated substitution by new energy, domestic refined oil products consumption declined by 8.6% year on year, among which gasoline decreased by 7.9%, diesel decreased by 11.5%, while jet fuel (kerosene) rose by 1.3% driven by holiday travel and the recovery of international routes," Sinopec said in its press release.

Jet fuel was the only major refined product category to grow in the period, and it is the fuel segment where Hou has signaled expansion ambitions through sustainable aviation fuels.

The company also said domestic demand for major chemical products remained weak, with ethylene equivalent consumption down 9.9% year on year. That softness presents a complication for a strategy that leans on chemicals, alongside new energy, to drive future revenue growth.

In the marketing and distribution segment, revenues fell 1.5% year on year in the first half of 2026. Sinopec said the decline was mainly due to lower sales volumes of refined oil products, reflecting the pressure of high oil prices on consumption and the accelerated substitution by new energy.

Hou said the company is looking to develop shale oil fields, expand sustainable aviation fuels, and reduce refining costs in order to make Sinopec more resilient to falling fuel demand in China.

"Gasoline was made for cars, yet half of new cars no longer need fuel ... Under these circumstances, how can producing more gasoline and diesel continue to generate revenue?" Hou told analysts at the results presentation on Monday.

For Sinopec, the capital shift is a response to a demand decline that its own results show has been building for two years.

By Charles Kennedy for Oilprice.com