A recent Reuters report highlights the significant impact of electric vehicles (EVs) in accelerating the transition away from fossil fuels. The growing global fleet of EVs is making a surprising dent in oil demand, leading experts to revise their projections for when global oil consumption will peak.
According to the Reuters report, the rise in sales of electric vehicles in recent years has prompted forecasters to revise their estimates for global oil use. Public subsidies and advancements in technology have played a crucial role in making battery-powered cars more accessible to consumers, despite their often high sticker prices.
The International Energy Agency (IEA) expects world oil consumption to reach its peak of 103 million barrels per day by the end of this decade. This projection represents a significant adjustment from the agency’s previous forecast of a peak in 2040. The report credits the shift to electrification as the game-changer, stating that policy support for EVs has substantially reduced oil demand from the transportation sector, which has been the primary driver of global oil demand growth.
Transportation accounts for approximately 60 percent of worldwide oil demand, with the United States alone contributing around 10 percent. However, the IEA predicts that the share of oil demand from transportation will decline as EVs are projected to eliminate about 5 million barrels per day of global oil demand by 2030.
The report emphasises that the increasing sales of EVs have been made possible by a combination of stricter efficiency standards and subsidies introduced by various governments worldwide since the 2015 Paris Agreement. These measures aim to limit global warming to within 1.5 degrees Celsius above pre-industrial temperatures.
Despite the progress, the Reuters report highlights that EV sales would need to reach approximately 70 percent of the market by 2030 to meet the Paris Agreement’s target. However, uncertainties remain as EV makers, such as General Motors, Ford, and Stellantis, have recently faced challenges in accelerating production due to rising labor costs and the impact of higher interest rates in the United States.
The report also examines the role of China in driving the growth of EVs. China benefits from lower EV prices compared to gasoline-powered counterparts, thanks to substantial government subsidies and easy access to rare earths crucial for EV production. With EVs already capturing a quarter of the market in China, the country is expected to lead global growth in this sector.
In contrast, the United States lags behind China in terms of both EV pricing and the availability of public charging stations. The average price of an EV in the United States is over $53,000, while China’s EVs cost significantly less, attributed to government subsidies and access to essential resources. Additionally, China boasts a far greater number of public charging stations compared to the United States and Europe.
However, despite the current disparities, the IEA predicts that EVs will account for up to 50 percent of new car registrations in the United States by 2030. The improving technology, falling prices, and the prospect of avoiding volatile fuel costs at gas pumps are driving consumers towards EVs.