For more than a century, two trends in global transportation have been relentless: humanity’s desire for more cars and the consumption of ever more oil to power them. The second part, at least, can reach the end.
By 2027, electric vehicles will force an upturn in the era of increased demand for oil used in transportation, according to a new forecast from BloombergNEF analysts. For areas outside of transportation, such as plastics, petrochemicals, manufacturing, and agriculture, demand for oil will continue to rise with no end in sight. But by 2029, BNEF expects the strong shift to electric vehicles to overtake everything else and bring total demand to its peak.
Oil analysts have spent years grappling with the impact of the transition to electric vehicles and have often been proven wrong. Small differences in assumptions about EV adoption can change predictions by years. But a growing consensus is emerging that peak oil for transportation is in sight. Four charts from BloombergNEF’s 2023 EV Outlook show where demand has already entered terminal decline and where there is lingering uncertainty.
Road transport has been the main driver of oil demand since Henry Ford made cars cheap and affordable for the masses. Today the open road is responsible for almost half of the world’s oil consumption. And as the car fleet electrifies, its share of the global oil market will decline to about a third of the market by 2040 and a quarter by 2050.
Electric vehicles on the road right now are already displacing the demand for more than 1.5 million barrels of oil per day. Battery-powered options are becoming competitive with internal combustion in more categories, and each new segment shrinks the market for future oil sales. Global sales of oil-powered cars peaked six years ago, and the shift to batteries is accelerating. Last year electric vehicle sales rose 62% worldwide, almost doubling in China, Australia and Japan, and more than tripling in India and Southeast Asia.
Price parity between battery and combustion was a first for new buses and two- and three-wheelers, which now operate at approximately 21% and 27% worldwide, respectively. Price parity is now starting to be achieved for the most important segment of all: passenger cars and trucks. By the end of the decade, electrified passenger vehicles will help quadruple the amount of oil avoided by electric vehicles to roughly 6 million barrels per day, according to BloombergNEF. Forecasters see no recovery from this.
The shift from growth to contraction in oil demand will be uneven geographically. Demand for oil used in road transport has already peaked in the United States and Europe, according to BloombergNEF, and will overtake China next year. The internal combustion engine market continues to grow in India, Australia and South Korea in the coming years.
In another decade, however, the oil phase-out will leave no major region of the world untouched. The chart below shows BloombergNEF’s forecast for the annual change in oil demand, by region, starting next year. The gray shaded area shows the last few years of increased net demand for oil used in transportation.
BloombergNEF analysts warn that the outlook for 2023, whose scenarios assume that current energy policies will continue, may be underestimating how quickly demand will change. About 68% of global emissions are now below government-backed “net zero” targets to offset all emissions by 2050, which is not possible under current regulations.
“The new policies are likely to accelerate ‘peak oil demand’ and lower the outlook for consumption,” the analysts wrote. “As the largest consumer of oil and with several options to decarbonise, future demand for road fuel is likely to decline further than our economic transition scenario suggests.”
It bites everything
Below are some related milestones projected in the BNEF 2023 Electric Vehicle Outlook:
- Peak internal combustion engine sales: 2017
- US Highway Oil Demand Peak: 2019
- Peak demand for road oil in Europe: 2022
- Peak demand for road oil in China: 2024
- Peak gasoline: 2027
- Peak Oil from Transport: 2027
- Diesel peak: 2029
- Peak Oil (all uses): 2029
- Transport fuel equivalent avoided by electric vehicles in 2030: 12%
- Transport fuel equivalent avoided in 2035: 24%
- Transport fuel equivalent avoided in 2040: 39%
- Oil avoided with US IRA bill: 430,000 b/d by 2040
To contact the author of this story:
Tom Randall in New York at trandall6@bloomberg.net
