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WoodMac: Demand For Oil In Transportation Sector To Peak In A Decade

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

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  • Tyrone on January 08 2019 said:
    Replacement battery for a GM Volt is $38,000. The warranty is only 8 years. GM may not survive 8 years. You cannot repair a dead battery. Governments have yet to penalize home electric rates with a gas tax. Yet electricity in California costs $0.30/KWH. The future of electric cars is dim. There are not enough innumerate virtue signalers to float the boat.
  • GW on January 08 2019 said:
    Tesla says they’ll have a 100$/kWh battery pack by 2020. Now add the pickup and commercial semi and peak oil will be 2023-2024.

    EV sales in the US were over 3% in December, not minuscule by any standard and rising 80% YOY.

    As they say, the trend is your friend.

    All these forecasts are based on linear growth. No technology in history has had linear adoption.

    We are hitting the steep aspect of the S-shape curve.
  • Mamdouh G Salameh on January 08 2019 said:
    Neither the global demand for crude oil for transportation nor global demand for oil in general will peak during the 21st century and far beyond. While global demand for both will continue to grow well into the 22nd century, the rate of demand growth will decelerate a bit on the back of efficiency improvements driven by technological developments, a tightening of energy policies and a relatively low (albeit increasing) penetration of electric vehicles (EVs).

    The global petrochemicals industry currently accounts for 13% or 13 million barrels a day (mbd) of daily global oil use. This is projected to grow by 30% by 2030 to 16.9 mbd and by 60% by 2050 to 19.5 mbd, pushing feedstock demand up by 7 mbd according to the International Energy Agency (IEA). This compares with global oil demand for transport amounting to 90 mbd by 2040. Therefore, the claim by the IEA’s Executive Director Fatih Birol in October 2018 that Petrochemicals will have a greater influence on the future of oil demand than transport is erroneous.

    Moreover, the claim by Wood Mackenzie that EVs will displace around 5-6 mbd of oil demand by 2040 —some 5% of total oil demand is equally erroneous and I will tell you why.

    Currently EVs and hybrid cars combined number under 2 million cars out of 1.477 billion internal combustion engines (ICEs) on the roads worldwide, or a negligible 0.14%. This is despite support by significant government subsidies. The total number of ICEs is projected to reach 2.0 bn by 2025 rising to 2.79 bn by 2040 according to US Research.

    At a most favourable scenario, we might have some 50 million EVs on the roads by 2040. By that time the world will be using 43.8 billion barrels a year (bb) of which 75% or 32.85 bb will be used to power 2.790 billion ICEs around the world. Bringing 50 EVs on the roads will reduce the global oil demand by only 0.59 bb (1.6 mbd) or 1.8% by 2040 and not the 5-6 mbd or 5% projected by Wood Mackenzie.

    However, I hasten to add that even 50 million EVs by 2040 is an impossibility. The reason is that current manufacturing capacity of EVs and hybrids amounts to 1 million vehicles annually of which only 500,000 are EVs and the rest are hybrids. So it will take many decades to manufacture 50 million EVs.

    Moreover, there will be a need for trillions of dollars of investment to expand the global electricity generation capacity in order to accommodate the extra electricity needed to recharge 50 million electric cars.

    A post-oil era is a myth. Oil will continue to rein supreme throughout the 21st century and far beyond.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • GW on January 08 2019 said:
    Batteries have 80% or higher capacity left after 8 years. No replacement required.

    Batteries prices drop 50% every 5 years which means EV prices are continuing to predictably drop year after year.

    EV growth in the US the past years:

    199,826-->361,307 2017-2018 >80%
    158,614-->199,826 2016-2017 26%
    116,099-->158,614 2015-2016 37%

    ICE sedans - sales dropping. The industry talking point has been people having been moving to SUV's and pickups. Partially true. They're also buying 360,000 EV's annually now with others waiting for the $35,000 Tesla Model 3 later this year.

    Hard to argue that EV's future is dim when performance is clearly superior, safety is the best of any car ever made, prices are constantly dropping, and growth is incredibly high. These are all objective measures supported by data.
  • Steverino on January 11 2019 said:
    Improved engine efficiency will increase demand for oil, not decrease it, because it effectively lowers the cost of gas. If you can drive 25 miles on a gallon of gas that costs $3, you buy more gas to drive more when a gallon of gas can take you 30 miles.

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