WEF Sees Huge Drop In Oil Demand As Electric Vehicle Sales Rise
We focus a lot on electric cars here at CleanTechnica, but while replacing conventional cars with battery-electric ones will help reduce global emissions from the transportation sector, passenger cars are just a small portion of overall emissions from transportation. As the world moves towards the electrification of the transportation sector, demand for oil will be replaced by demand for electricity.
To highlight the EV impact on oil consumption, the World Economic Forum has created an infographic using data from BloombergNEF that shows how much oil will be saved in 2025 by various types of electric vehicles, assuming existing adoption trends continue.
Holy heck, that’s a lot of oil — more than 2 million barrels — not getting burned every day. More than 2 million barrels that won’t spew more crud into the atmosphere and two million barrels that won’t add more heat to the world’s already too hot oceans. That’s a big deal. Now let’s dig in to some of the numbers in the graphic.
Barrels Of Oil Equivalent
A standard combustion engine passenger vehicle in the U.S. uses about 11 barrels of oil equivalent (BOE) per year. A motorcycle uses 1, a Class 8 truck about 24, and a bus uses more than 258 BOEs per year. If you are not familiar with the term “barrel of oil equivalent,” Wikipedia says it is a unit of energy based on the approximate energy released by burning one barrel (42 US gallons). BOE is used by oil and gas companies in their financial statements as a way of combining oil and natural gas reserves and production into a single measure, although this energy equivalence does not take into account the lower financial value of energy in the form of gas.
When these vehicles become electrified, the oil that their combustion engine counterparts would have used is no longer needed, displacing oil demand with electricity. What the WEF graphic does not address is how much the transition to clean energy from renewables like wind and solar will also suppress demand for oil and gas. If most of the electric vehicles on the road are powered by clean energy, their impact on oil and gas demand will be magnified.
Oil Demand By Category
Looking at the categories of vehicles in the WEF graphic, we see that buses use a lot of oil, mostly in the form of diesel fuel. The term “bus” can apply to many different types of vehicles, from school buses that only operate a few hours a day, to city public transportation buses that run 20 hours a day, to interurban buses that travel long distances. Clearly, buses are some of the hardest working vehicles, using ten times as much energy every year as a Class 8 truck. Buses never rest, apparently.
In 2022, the electric car market experienced exponential growth, with sales exceeding 10 million cars. The market is expected to continue its strong growth throughout 2023 and beyond, eventually coming to save a predicted 886,700 barrels of oil per day in 2025.
There may be more and more electric cars on the road, but electric trucks are just starting to go mainstream. BloombergNEF predicts demand for them will increase as fleet operators come under increasing pressure to decarbonize their rolling stock. China is the leader at the present time in electric trucks. In its 2022 Road Fuel Outlook, BloombergNEF said commercial vehicle growth would keep oil demand growing, but not for long. It sees “overall road transport reaching peak oil demand in 2027, but if sales of electric trucks continue to rise sharply in China, that could be pulled forward.”
Surprisingly, the vehicles that have put the biggest dent in the demand for oil are the 2- and 3-wheeled bicycles, mopeds, scooters, and motorcycles that have gone electric in a big way in many parts of the world, especially Asia and India.
These vehicles displaced demand for almost 675,000 barrels of oil per day in 2015. By 2021, that number had quickly grown to 1 million barrels per day, the World Economic Forum says. Its projections suggest the number of these personal mobility devices will remain fairly constant between now and 2025, but we can’t think of any reason why their numbers shouldn’t continue to increase. Clearly, these vehicles have an outsized impact on the demand for gasoline and the more electric ones there are, the less the demand for gasoline to run them will be.
Demand Versus Prices
While the world shifts from fossil fuels to electricity, Bloomberg New Energy Finance predicts the decline in oil demand will not necessarily equate to a drop in oil prices. In the event that investments in new supply capacity decrease more rapidly than demand, oil prices could still remain unstable and high. The US Energy Information Agency predicts that demand for oil will not peak until nearly the middle of this century.
We have seen dramatic moves by oil producing nations in the past 12 months to limit production as they battle for market share and plot to maintain profits. It is noteworthy that oil companies have reported some of their largest profits ever recently, driven largely by the disruptions in the marketplace created by Russia’s war crimes in Ukraine. Big Oil has never shied away from taking advantage of other people’s misery to line its own pockets.
Nevertheless, Transport & Environment claims the EU could reduce its demand for oil to power its transportation needs by more than a third fairly quickly by speeding up the transition to electric vehicles.
Electricity & Charging Infrastructure
While most of us associate electric vehicles with lower emissions, it’s good to consider that they are only as sustainable as the electricity used to charge them. The WEF says the shift to electrification in the transportation sector represents a significant opportunity to meet the growing demand for electricity with clean energy sources, such as wind, solar, and nuclear power.
The shift away from fossil fuels in road transport will also require expanded infrastructure. EV charging stations, expanded transmission capacity, and battery storage will likely all be key to supporting the wide scale transition from gas to electricity.
In fact, charging infrastructure is getting serious attention not only from the Biden administration in America, but all across the world. In Norway, sales of new electric cars are now over 90% of the market. And yet Elvia, the utility company that supplies electricity to Oslo and the surrounding area, told the New York Times recently that while it has needed to upgrade some transformers, “We haven’t seen any issue of the grid collapsing.”
The EV revolution will put enormous pressure on the fossil fuel industry, and not a moment too soon. These are the folks who have been responsible for adding the heat of 25 billion atomic bombs to the world’s oceans in the past 50 years, endangering all of us alive today and the lives of future generations. The end of oil cannot happen soon enough if we are to have any hope of survival as a species.
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