The decreasing demand for oil in the face of the unprecedented growth of electric vehicles
The electrification revolution within the transportation industry is creating significant disruptions across the entire energy sector, exerting a powerful influence on the oil market. With the rising popularity of electric cars, there is a substantial reduction in the need for gasoline and diesel.
Currently, gasoline and diesel make up more than 90% of the overall demand in the global transportation sector. Nevertheless, this figure is anticipated to witness a sharp decline in the upcoming years due to the remarkable surge in the adoption of electric vehicles. According to the projections of the International Energy Agency (IEA), electric cars are expected to supplant the consumption of 5 million barrels of oil per day by 2030 and 13 million barrels per day by 2040.
In the December 2023 Oil Market Report by the International Energy Agency (IEA), the global demand for oil in Q4 2023 has been revised downwards by nearly 400 thousand barrels per day, with over 50% of this reduction attributed to Europe. This downward trend is expected to persist into 2024, with global growth halving to 1.1 million barrels per day. The surge in the electric vehicle market is identified as a significant factor contributing to the diminishing demand.
The ongoing technological transformation in the transportation sector is anticipated to continue diminishing the global economy’s reliance on oil. The U.S. Energy Information Administration (EIA) reports that electric and hybrid vehicles constitute 18% of the U.S. light-duty vehicle sales in Q3 2023 and 33% in China, based on data from Bloomberg Intelligence. Consequently, the EIA predicts that the increasing prevalence of electric and hybrid vehicles will, to some extent, impact the consumption of fuels for internal combustion engines.
Remarkably, the electric vehicle boom is causing a “shift” in the oil era in China, the world’s largest crude oil importer, where almost half of the total oil consumption is attributed to the transportation sector. According to BloombergNEF, China has achieved over 18 million electric vehicle sales since the beginning of 2017, accounting for nearly half of the global total and four times that of the United States. In 2022, China accounted for almost 60% of global new electric car registrations. It is projected that electric vehicles will make up 50% of China’s total new car sales by 2026. Robert Brecha, a sustainability professor at the University of Dayton in Ohio, suggests that if China’s electric vehicle growth rate persists over the next decade, global oil consumption could undergo substantial disruption.
Confronting the “electric storm”, energy companies are swiftly preparing for potential disruptions and actively developing adaptable business models. According to Automotive News, major U.S. oil companies are energetically installing electric charging stations at all gas stations nationwide. Over the next 18 months, the electric charging infrastructure in the U.S. will be integrated with the existing petrol station network. This adaptation strategy is how these “oil giants” aim to retain their position amidst the ascent of electric vehicles.
The electric cars – A tremor in the automotive industry
The upswing of electric vehicles is not merely a trend but rather a profound transformation in the automotive sector. According to data from the market research company Rho Motion, global sales of electric and hybrid cars experienced a 31% growth in 2023 compared to 2022, totaling 13.6 million units. Among these, electric cars comprised 9.5 million units, and hybrid cars accounted for 4.1 million units. Notably, electric car sales surged by 50% in North America, 27% in Europe, and 15% in China during the same period.
Besides the dominant SUV segment currently holding a significant 60% consumer preference in the electric vehicle market, automakers are ramping up the production of smaller, more affordable models, especially in Europe and the United States. There is also a notable emphasis on electric trucks and buses. Presently, there are around 400,000 light-duty electric trucks, almost 100,000 medium-duty and heavy-duty trucks, and close to 100,000 electric buses globally. Electric trucks and buses typically offer a range of 300-400 km, primarily concentrated in China. The electric vehicle market is expected to witness a substantial surge in the coming years, offering diverse options to meet various consumer transportation needs.
As per the International Energy Agency’s (IEA) projections, by 2030, electric cars will represent over 10% of the total number of road vehicles. The global electric car fleet is anticipated to grow from approximately 40 million units in 2023 to a range of 240-250 million units by 2030. Additionally, sales are predicted to surpass 20 million units by 2025 and exceed 40 million units by 2030. With a 30% annual growth rate, electric cars are poised to surpass traditional gasoline/diesel cars, becoming the most prevalent mode of transportation on the road.
Nevertheless, experts estimate that to achieve the Net Zero emissions target by 2050, electric cars must maintain an average annual growth rate of over 40%. By 2030, the global total of electric cars needs to reach 380 million units, indicating the necessity for more substantial advancements in the electrification of transportation.
With the rising number of electric vehicles on the roads, there is a noticeable shift in how people utilize and think about energy, as well as their interaction with the environment. In 2022, with slightly over 26 million electric cars in circulation worldwide, the Earth saw a reduction of 80 million tons in greenhouse gas emissions. This figure is expected to multiply as countries strive towards a more electrified and sustainable transportation system, fostering a greener living environment for everyone.
By. Pham Thanh Bien
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