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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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Electric Vehicles Won’t Topple Oil…Yet


While governments around the world are starting to mandate electricity over oil for powering motor vehicles, what are the chances of oil supply being severely impacted in the next quarter century?

Electric vehicle demand appears ready to be increasing in key markets like China, Europe, and the U.S., but it is something to keep in perspective with overall global demand.

France has committed to banning gasoline and diesel-powered vehicles by 2040. Germany and the European Union are cracking down on automakers for violations of diesel emissions rules and reporting with Daimler most recently pulled into the fray. Cities such as Paris and London are concerned about climate change, and are pursuing policies restricting cars and trucks from causing more heavy traffic and air pollution.

China appears to be moving away from its “new energy vehicle” subsidies and would like to adopt the zero-emissions vehicle policy that California Gov. Jerry Brown has brought to the state. Four global industry trade groups have asked China’s Minister of Industry and Information Technology to scale it down. That letter was signed by automotive officials from around the world including the American Automotive Policy Council, the European Automobile Manufacturers Association, the Japan Automobile Manufacturers Association, and the Korea Automobile Manufacturers Association.

Dutch bank ING warned this week that all new cars sold in Europe will be electric within less than two decades. That will be carried through by government support, falling battery costs, and economies of scale. European automakers will also need to watch out for U.S. and Asian carmakers who already have the lead on battery production for electric vehicles. Related: Russian Oil Output Falls While OPEC Boosts Exports

There are other studies making the case for electrification over oil in passenger vehicle transportation. A new study by Bloomberg New Energy Finance was just released that warns about the impact of booming EV sales. OPEC quintupled its previous forecast and now predicts that growth in EV sales will mean that oil demand will be reduced 8 million barrels by 2040. Exxon Mobil Corp. to BP Plc also revised up their outlooks in the past year and expect oil to have more impact according to the Bloomberg study.

The International Energy Agency (IEA) isn’t arguing about expected growth in EVs, but is looking at oil demand from a much larger scale. Speaking at the 22nd World Petroleum Congress (WPC) in Istanbul, Turkey, IEA Executive Dr. Fatih Birol made a few key points on analyzing oil demand in the next quarter century and beyond.

Some of his points included:

- By the end of 2016, there were 2 million electric cars in the world. However, that's less than 1 percent of total global car sales.
- Global oil demand growth is currently averaging 1.2–1.3 million barrels per day, and that rate will continue to grow.
- The bulk of the demand is not from passenger cars but from trucks, aviation, and petrochemical manufacturers,
- He believes it’s too simplistic to assume 'peak demand' for oil in a matter of years and tie it in to the growth of EVs, with demand increasing from other users. Related: The Only Way OPEC Can Kill U.S. Shale

Passenger vehicle fuel consumption will see some changes with grow in sales of EVs and other alternative fuels, coupled with more efficient vehicle technologies. However, it’s important to keep it in perspective for consideration in the immediate future.

An example of it comes from China. Even with rapid growth rates in EV sales, it’s yet to make a difference in fuel consumption and emissions. China, the world’s largest auto sales market for several years now, only saw about 2 percent of its total vehicle sales last year coming from EVs. The government recognizes that changes must be made to deal with growing cities impacted by worsening air pollutio

By Jon LeSage for Oilprice.com

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  • snoopyloopy on July 17 2017 said:
    "- The bulk of the demand is not from passenger cars but from trucks, aviation, and petrochemical manufacturers,"

    It's important to realize that the move isn't just toward electric cars, but electric vehicles of all types. There are already several ongoing trials and early adoptions of electric (and fuel cell) trucks and major players have already announced their plans to speed up options in the segment in an attempt to stave of Tesla. Buses aren't in the list, but a lot of them are quickly turning electric and China put over 100k of them on their roads last year. Boats, ships, and tugs are starting to be hybridized or switch from oil, with each application easily equaling the demand of several dozen passenger cars. Even aviation has provided some early interest in the concept of electric airplanes, though we're undoubtedly probably at least a decade away from a viable competitor in the commercial passenger space. That leaves just petrochemicals, but is that sector alone really going to pick up all the slack that will be created as vehicles go electric?
  • Jhm on July 18 2017 said:
    The oil industry and commentators turn a huge bind eye to the electrification of heavy vehicles. Last year China alone put 116k electric buses into service avoiding demand for about 75 kb/d of diesel. Not coincidentally China led the world in cutting diesel demand in 2016.

    Let's put this into perspective. Private passenger cars are light vehicles. This year there will be about 1.2 million new light EVs. This is enough to avoud 40 to 48 kb/b of gasoline consumption. Not bad, but new heavy EV sales could exceed 160,000. This is enough to avoid 96 to 112 kb/b of diesel consumption.

    So already heavy EVs are in a position to offset more than twice the fuel demand as light EVs are offsetting. This is a huge bind spot. Analysts just don't see the electric semis approaching in the forward view mirror!

    Put together heavy and light EVs in 2017 stand to avoid 136 to 160 kb/b in oil demand creation. This may seem ignorably since it is only about 10% of oil demand creation. But keep an eye on it. This 150 kb/d can easily double every 24 months. So in 3 doublings, 6 years to 2023, the EV impact can reach 1.2 mb/d.

    If you insist on ignoring heavy EVs, you won't see this coming. The endless drip of articles such as this on seems bent on perpetuating ignorance about real promise/threat of heavy EVs.
  • Mark Battey on July 22 2017 said:
    Falling solar prices and the lack of required infrastructure to deliver the fuel will hasten the transition. Imagine a category five hurricane slamming into the Louisiana coast now causing massive damage to oil infrastructure. With constant oversupply, the price might barely move. Whose gonna want to pay to fix it?
  • Powerhouse Energy hydrogen from waste on July 30 2017 said:
    Another way is hydrogen, already new technology that takes waste and turns that garbage into either synthesis gas of is then sent to a combustion engine to generate electricity. The second option is to split the gas into hydrogen 99.9995% purity and carbon monoxide of is sent to generate electricity via combustion engine. The reactor has no chimney, expels no toxic smoke (no chimney) and no toxic ash. Uk company LSE: PHE Powerhouse Energy Group.

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