Oil demand is set to face an even bigger threat from fuel-efficient engines than from electric vehicles over the next two decades, according to Bloomberg New Energy Finance.
Engine and other vehicle improvements that increase the distance vehicles can travel per unit of fuel will erode global oil consumption by 7.5 million barrels a day by 2040, more than the 6.4-million-barrel decline due to electric vehicles, BNEF forecast in a report Monday.
Demand from passenger cars is set to peak in 2022 before falling to 15.9 million barrels a day from 24 million now, according to the note.
“Improvements in the fuel economy of the internal combustion engine and the increasing uptake of passenger electric vehicles are set to have a profound effect on the future of oil in the transport sector,” BNEF analysts including Richard Chatterton wrote in the report.
While analysts are painting an increasingly bearish picture for oil beyond the next 20 years as more electric vehicles hit roads and engines become more efficient, some in the energy industry see the threat as overblown.
The CEO of Saudi Arabia’s state crude producer said in March the need for petroleum isn’t going away any time soon, and Exxon Mobil Corp. has said its traditional fossil fuels business isn’t threatened by climate-change policies.
Saudi Arabia, the world’s biggest oil exporter, is investing in developing more efficient gasoline-powered engines and testing new methods of turning a barrel of crude directly into petrochemicals with the goal of prolonging the demand for petroleum.
While BP Plc CEO Bob Dudley sees “tremendous” opportunities around the arrival of electric cars, he’s said they’re “not the silver bullet that everyone’s looking for.”
Regulatory standards, improvements in engine design and greater integration of hybrid technologies will lead to an increase in the average efficiency of new internal-combustion engine cars sold in all regions over time, according to the BNEF report.
While the erosion in demand because of the transformation in how people travel on road will begin slowly, it will accelerate after 2030 as EVs rapidly become more popular, the report said.
By 2040, 55 percent of all new car sales and 33 percent of the fleet will be electric, according to BNEF. The penetration of EVs in total new passenger vehicle sales will differ between countries out to 2040, it said.
“We expect EVs to hit almost 40 percent of sales in China in 2030, but just 4 percent in India,” BNEF said in the report.
On the flip side, electricity demand from new-energy transportation could rise nearly 20-fold between the end of this decade and 2040, when consumption from electric passenger vehicles and buses will reach 2,000 terawatt-hours, or about 6 percent of total global use, BNEF said. The bulk of that will be from passenger EVs, with only a tenth coming from electric buses.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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