Access unique and timely investment insights
Oil is still the dominant source of energy for road transportation—and will be for many years to come. Globally, electricity currently counts for just 0.4% of the energy used in road transportation. Most of this—about 75%—is in one market, China. While electricity’s share is still small, its use in transportation globally has tripled since 2010 and will continue to rise.
For the oil market, what matters is how much demand is displaced by electricity. In 2020, there were about 9.2 million light plug-in electric vehicles (PEVs) in the global light vehicle (LV) fleet. There were 20,000 fuel cell electric vehicles. Collectively, these vehicles displaced about 150,000 b/d of oil consumption—less than 0.2% of world consumption. Adding in electric city buses and two-wheelers, the amount of oil displaced adds up to 370,000 b/d, or 0.4% of world oil demand in 2020.
The amount of oil displaced by electricity will continue to rise, led by growth in PEV sales. By 2025, we estimate that light PEVs will displace about 0.9-1.1 MMb/d of world oil demand. Adding in electric buses and two-wheelers, oil displacement by electricity in road transportation could hit 1.5 MMb/d, which would be equivalent to about 1.4% of our projected level of total world oil demand in 2025. This may not seem like a large amount, but keep in mind oilpowered LVs were the largest source of aggregate oil demand growth from 2000 to 2019. Our view is that oil demand (gasoline and diesel) from LVs peaked globally in 2019 at 29.1 MMb/d.
The electrification trend plays a role—along with rising fuel economy and emissions standards for oil-powered cars— in the plateau and later decline of total world oil demand, which we expect to emerge at some point over the next 10-15 years in our base-case outlook. In our alternative scenario, Autonomy, peak world oil demand occurred already in 2019.
Among alternative sources of vehicle propulsion, electricity has the upper hand in terms of political support and automotive industry capital investment. The GM announcement is part of the story. That is not to say that hydrogen, biofuels, and natural gas will not play a role, because they will. GM makes the Bolt electric car and, later this year, will begin selling the electric Hummer SUV. Its surprise announcement is indeed a “bolt from the blue.”
From IHS Markit Crude Oil Markets
Based on original research from: Fellipe Balieiro, Associate Director. Jim Burkhard, Vice President