While governments around the world are starting to mandate electricity over oil for powering motor vehicles, what are the chances of oil supply being severely impacted in the next quarter century?
Electric vehicle demand appears ready to be increasing in key markets like China, Europe, and the U.S., but it is something to keep in perspective with overall global demand.
France has committed to banning gasoline and diesel-powered vehicles by 2040. Germany and the European Union are cracking down on automakers for violations of diesel emissions rules and reporting with Daimler most recently pulled into the fray. Cities such as Paris and London are concerned about climate change, and are pursuing policies restricting cars and trucks from causing more heavy traffic and air pollution.
China appears to be moving away from its “new energy vehicle” subsidies and would like to adopt the zero-emissions vehicle policy that California Gov. Jerry Brown has brought to the state. Four global industry trade groups have asked China’s Minister of Industry and Information Technology to scale it down. That letter was signed by automotive officials from around the world including the American Automotive Policy Council, the European Automobile Manufacturers Association, the Japan Automobile Manufacturers Association, and the Korea Automobile Manufacturers Association.
Dutch bank ING warned this week that all new cars sold in Europe will be electric within less than two decades. That will be carried through by government support, falling battery costs, and economies of scale. European automakers will also need to watch out for U.S. and Asian carmakers who already have the lead on battery production for electric vehicles.
There are other studies making the case for electrification over oil in passenger vehicle transportation. A new study by Bloomberg New Energy Finance was just released that warns about the impact of booming EV sales. OPEC quintupled its previous forecast and now predicts that growth in EV sales will mean that oil demand will be reduced 8 million barrels by 2040. Exxon Mobil Corp. to BP Plc also revised up their outlooks in the past year and expect oil to have more impact according to the Bloomberg study.
The International Energy Agency (IEA) isn’t arguing about expected growth in EVs, but is looking at oil demand from a much larger scale. Speaking at the 22nd World Petroleum Congress (WPC) in Istanbul, Turkey, IEA Executive Dr. Fatih Birol made a few key points on analyzing oil demand in the next quarter century and beyond.
Some of his points included:
- By the end of 2016, there were 2 million electric cars in the world. However, that's less than 1 percent of total global car sales.
- Global oil demand growth is currently averaging 1.2–1.3 million barrels per day, and that rate will continue to grow.
- The bulk of the demand is not from passenger cars but from trucks, aviation, and petrochemical manufacturers,
- He believes it’s too simplistic to assume 'peak demand' for oil in a matter of years and tie it in to the growth of EVs, with demand increasing from other users.
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Passenger vehicle fuel consumption will see some changes with grow in sales of EVs and other alternative fuels, coupled with more efficient vehicle technologies. However, it’s important to keep it in perspective for consideration in the immediate future.
An example of it comes from China. Even with rapid growth rates in EV sales, it’s yet to make a difference in fuel consumption and emissions. China, the world’s largest auto sales market for several years now, only saw about 2 percent of its total vehicle sales last year coming from EVs. The government recognizes that changes must be made to deal with growing cities impacted by worsening air pollutio
By Jon LeSage for Oilprice.com
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