Global transportation demand for crude oil is expected to peak in the late 2020s, due to the rise of electric vehicles (EVs), improved efficiency standards for internal combustion engine (ICE) cars, and consumer preferences, Wood Mackenzie said in a recent note.
Most major oil companies and analysts also believe that by the late 2020s crude oil demand for transportation fuels will stop growing. As a result, major refiners are preparing for a petrochemical future of their crude oil refining processes to replace part of their gasoline, diesel, and other distillates production after 2030.
“Many oil production and refining companies are emphasising chemicals - particularly olefins and aromatics - as a key target area for future crude oil long-term demand growth,” wrote Steve Zinger, Senior Vice President, Petrochemicals, at WoodMac.
Major oil firms, including ExxonMobil, Saudi Aramco, and Sabic, are developing crude-oil-to-chemicals technologies, while many traditional oil refineries will consider retrofitting to maximize production of chemical feedstocks rather than transportation fuels, the energy consultancy said.
According to recent estimates by the International Energy Agency (IEA), petrochemicals are expected to account for more than a third of global oil demand growth to 2030, and nearly half the growth to 2050, adding nearly 7 million bpd by then. Petrochemicals “will have a greater influence on the future of oil demand than cars, trucks and aviation,” the IEA’s Executive Director Fatih Birol said in October 2018. Related: Has U.S. Fracking Activity Peaked Already?
According to a WoodMac analysis from a few months ago, the EV share of the global car fleet is still miniscule, considering that the world’s stock of cars is 1.2 billion units. But battery costs and range are less and less the stumbling blocks in EV adoption. Battery is one third of the cost of an EV today. Yet, costs have already declined by 80 percent this decade and will fall further. Battery pack prices will drop below US$200/kWh this year and then fall by around 10 percent each year, WoodMac said in July.
“The critical threshold is US$100/kWh – that’s when EVs will compete on commercial terms with ICE vehicles. We think we’ll get there by 2027,” WoodMac says.
EVs will displace around 5 million bpd to 6 million bpd of oil demand by 2040—some 5 percent of total oil demand, the consultancy has estimated.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Saudis Set Sights On $80 Oil
- Libya Aims To Double Oil Production Within 2 Years
- The Overlooked Factor Driving The Rally In Oil