The latest Energy Security Fact Pack from SAFE examines peak oil demand forecasts, improvements in light-duty fuel economy, how close automakers are to reaching the 200,000 federal EV tax credit threshold, rising investment in autonomous vehicles, and more.
A number of forecasting agencies are now moving up their timeline for peak demand as a result of increasing EV penetration.
Peak oil demand continues to be a major topic for policymakers, industry, and consumers. Many forecasting agencies are now moving up their timeline for peak demand as a result of increasing EV penetration, rapidly declining battery costs, and improvements in EV range and affordability. Even so, others warn that peak oil demand is still decades away. Currently, the world’s oil demand is not slowing down. In 2017, the world consumed an average of 98.4 million barrels of liquid fuels each day (Mbd), nearly 60 percent of which was devoted to transportation. Demand growth has been roughly steady since 2014, growing at an average quarterly pace of 1.6 Mbd. China, alongside countries outside the economically advanced OECD, accounts for the majority of this growth. The Fact Pack also highlights recent growth in automobile sales in China.
Assumptions about EV adoption and vehicle fuel economy create the divergence in long-term forecasts. We at SAFE have been tracking peak demand projections, and have compiled a compendium of forecasts in the Fact Pack.
In its recently released Energy Outlook, oil major BP described EVs as the “key uncertainty” in demand scenarios, and highlighted that advances in autonomy and shared mobility could significantly boost electrification in the 2030s. In candid remarks last July, Royal Dutch Shell’s CEO Ben van Beurden said his company had changed its mindset to a “lower forever” oil price environment, noting that a steep increase in EV adoption over the next 15 years will curb demand growth. Shell believes peak oil demand could occur as early as 2030. Norway’s national oil company Statoil ASA also sees oil demand peaking in the 2020s, with light-duty vehicle (LDV) fuel demand falling versus 2014 levels given substantial consumer adoption of EVs.
Meanwhile, others are not as optimistic. Saudi Arabia and Russia—both of which are cooperating to reduce global oil supply to increase prices—believe demand will not peak until 2050. They hope growth will continue to be high enough to support national budgets through high export revenues. The IEA has also warned against setting an early date for peak oil demand. Fatih Birol told Bloomberg TV last week: “Changes in the car industry will definitely slow down the growth of oil, but it will still grow. We don’t see a peak in the next two decades.”
Although BP anticipates 320 million new EV sales through 2040 (16 percent of the total cars), petroleum will continue to power the vast majority of passenger trips.
Even though BP’s 2018 Outlook marked the first time the oil major forecast peak demand in its long-term projections, it noted that although it anticipates 320 million new EV sales through 2040 (16 percent of the total cars), petroleum will continue to power the vast majority of passenger trips.
U.S. makes gains in fuel economy, EVs & autonomy
In the U.S., there are positive signs that the country is reducing its oil dependence. EIA’s latest outlook shows substantial LDV fuel economy improvements through 2050. LDV fuel economy will save up to 2.6 Mbd in the coming decades as current rules boost efficiency over 2016 levels. Fleetwide miles per gallon (mpg) will improve from 22.4 mpg to 38.2 mpg by 2050 (+15.8 mpg over 2016 levels), EIA’s latest data says.
At the same time, U.S. EV sales continue to rise to historic levels. Over 193,000 EVs were sold in 2017, a 22 percent increase over last year. The outlook for EVs in 2018 is positive because of the extension of the $7,500 federal tax credit, competitive pricing among EV models, improvements in range, and rising gasoline costs. However, only about 32,000 and 37,000 tax credits remain for GM and Tesla, respectively, as several automakers near the maximum 200,000 federal tax credit threshold for EVs.
As EV demand picks up, auto and tech companies are investing heavily in AVs.
As EV demand picks up, auto and tech companies are investing heavily in AVs. Alongside electrification, ridesharing and autonomy can catalyze fuel displacement. In H1 2017, auto tech firms announced more than $70 billion in AV spending and created 24 new partnerships. BP said that AVs, when integrated with shared mobility technologies, should “substantially boost the intensity with which electric cars are driven,” and can save an additional fuel.
Given the natural synergies between AVs and EVs, growth of self-driving cars will accelerate electrification and ultimately bring about more diversity in the transportation sector. But even though technology is changing at a quick pace, petroleum’s monopoly on the transportation sector will still be difficult to break.