At a Circle K gas station outside Kongsberg, Norway, charging electric cars outnumber gas pumps. It’s a scene that’s constantly playing out across the Nordic country, offering a glimpse of what may be in store for drivers around the world in the coming years.
When it comes to electric vehicles, Norway is a pioneer. It has moved away from the internal combustion engine much faster than its neighbors thanks to generous tax breaks and incentives, which made Tesla Inc.’s battery-powered Model Y. be cost competitive with a Toyota Motor Corp. RAV4 that runs on gas.
Most countries can’t afford to move as quickly as wealthy Norway: The nation’s government estimates that various support measures are costing it about $1.8 billion a year in lost revenue. But the International Energy Agency says the rest of the world is headed in the same direction, causing oil demand to peak before the end of the decade.
“In Norway, the sale of new electric cars has grown from 3 percent in 2012 to almost 80 percent in 2022,” Christina Bu, secretary general of the Norwegian Electric Vehicle Association, said in an interview. “I think the rest of the world needs to learn from this and realize that this change is going to happen.”
Norway’s experience shows a possible downward trajectory for global fuel demand. However, it also highlights the limitations of electric cars in curbing global fossil fuel consumption and achieving net zero emissions.
After years of subsidies, more than a fifth of Norway’s car fleet now runs on batteries. As a result, gasoline consumption has fallen by 37% since 2013, according to Eurostat data. Many other countries have also seen their consumption of this fuel decline as their cars became more efficient, but Norway has overtaken them due to its more generous financial incentives for electric cars.
However, for other types of transport, oil has been more difficult to give up.
Although electric cars accounted for 23% of the miles driven in Norway in 2022, diesel still accounted for 43% of the distance driven. Heavier trucks, which for technological reasons have not seen widespread adoption of electric drive trains, still run mostly on diesel, Norwegian Road Federation director Oyvind Solberg Thorsen said in an interview.
Diesel consumption in Norway is only 10% below its 2015 peak and has yet to show a steady downward trend, with demand picking up since 2020, according to data from Statistics Norway. It’s a similar story for aviation.
“If you want to drive a truck, if you want to operate a mining machine, if you want to do things in the global economy, you need diesel,” said Bjarne Schieldrop, chief commodity analyst at SEB AB.
Norway’s per capita oil consumption has fallen by nearly a quarter since 2002, according to Bloomberg calculations using data from the Energy Institute Statistical Review of World Energy. But it’s still higher than many of the country’s neighbors, where global demand has fallen faster even without the widespread adoption of electric cars.
Norway’s oil demand has proven resilient, in part because its population has grown by about 1 percent a year since 2008, a faster rate than its neighbors, Schieldrop said. It is also a wealthy country where consumers have money to spend on cars and holidays, as well as large oil, maritime and industrial sectors that use petroleum products.
“We are surrounded by different products and systems that make us need petroleum products, and where there is no easy replacement,” said Norwegian Petroleum and Energy Minister Terje Aasland.
“Therefore, we will still need oil for industrial purposes, even if we reduce fossil fuel inputs in the transport sector.”
Aasland himself illustrates this dichotomy. He is a “satisfied” owner of both a Tesla and an Audi e-tron who in April told Norwegian companies to “leave no stone unturned” in their search for oil and gas reserves.
Norway’s experience suggests that electric cars are not a panacea for carbon emissions, but they can still have a significant impact on fossil fuel consumption. Battery and fuel cell vehicles have already cut 1.5 million barrels a day of global oil demand, about 1.5 percent of total consumption, according to BloombergNEF’s Electric Vehicle Outlook. The report sees oil use for road transport peaking in 2027 in its net zero scenario.
“What’s so dramatic about electric cars is that you can use all forms of energy to make electrons,” SEB’s Schieldrop said. “Oil has gone from having no competition, other than gas on the margins, and being the king of transportation, to suddenly facing competition from nuclear, coal, hydro, wind, solar, whatever energy there is.”
At Kongsberg’s Circle K station, which opened in May 2021, charging points are at the front, with petrol and diesel pumps relegated to the back.
“This is a dramatic change for oil’s position in the entire energy system,” Schieldrop said.
To contact the authors of this story:
Kari Lundgren in Oslo at klundgren2@bloomberg.net
Stephen Treloar in Oslo at streloar1@bloomberg.net
