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We explored how the market for EVs might develop in part 1. This week Ed Rawle, Head of Oils Research, chats about the implications for global oil demand.
Around 5 to 6 million b/d by 2040 - about 5% of total oil demand.
EVs take the lion's share of 'lost oil demand', 3.5 million b/d in like-for-like displacement of ICE vehicles; another 1 million b/d is from Autonomous EVs (AEVs) coming later into the game; and 1 million b/d from short haul e-trucks - battery technology won't convert long haul transportation for some decades. We've also factored in ongoing efficiency gains for ICE vehicles which will compete to retain market share.
Everywhere, but at very different rates. We expect the global stock of EVs will climb to nearly 300 million vehicles by 2040, up from just 5 million today.
Demographics and population are big factors. But really, the developed world will lead the revolution.
Some European countries will hit 100% of new car sales by 2040, helped by government policy and society's desire to reduce emissions. The US won't be far behind, but the rate of penetration will be slower than in Europe. The typical US car is bigger and heavier than elsewhere, with light trucks and SUVs popular for example, posing challenges for battery technology.
China is key to EVs' growth because of the size and growth of the middle class. The total car fleet in China will have doubled to almost 380 million by 2040, and while penetration will be lower than in the US, it will be the biggest EV market in the world.
Far from it. ICE vehicles will be a force even in the new car sales market for some time. We expect the global car fleet to grow by around 600 million vehicles to 1.8 billion by 2040, with over half of the increase ICE vehicles - largely driven by demand from the developing world. But the global stock of ICE vehicles peaks around 2030, within a few years of EVs gaining commercial traction.
Demand for gasoline peaks in the early 2030s and diesel plateaus shortly after - broadly in line with the peak in ICE vehicle stock. But total oil demand continues to rise for a few more years driven by demand from petrochemicals.
The speed of commercialisation of AEVs is one. We assume AEVs are commercial by 2030 and gain public acceptance in certain cities by 2035, and there are just 20 million AEVs on the road by 2040 - a tiny fraction of the world's 1.8 billion light vehicle fleet.
Most AEVs will used as a ridesharing service, and driven five times as much as a regular vehicle. In a scenario where the technology is proven five years earlier, AEVs on their own could displace 5 million b/d of oil demand by 2040 - and total demand lost might be 10 million b/d.
The 5 to 6 million b/d lost from the oil market to EVs by 2040 is likely the thin end of the wedge. But the exact timing of peak oil demand is difficult to predict, as is the rate of future decline. That's why oil and gas companies need to build portfolio flexibility and optionality for the energy transition whilst at the same time continuing to adapt the core oil and gas business which will be their mainstay for decades yet.
Absolutely not. Oil demand will still be around 110 million b/d in 2040. Production declines from existing fields mean that the industry needs to bring 40 million b/d of new supply onto the market to meet that demand.
That will need a lot of investment - in fields already on stream, in undeveloped resources, and in exploration. Oil companies need to take 'peak oil demand' seriously, but there's plenty of life left in the industry - and still money to be made.