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Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

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EVs Could Erase 7 Million Bpd In Demand

Electric vehicle charging station

Electric vehicles will become cheaper than the internal combustion engine in a half decade, while electric buses will completely “dominate” its sector by the late-2020s, according to Bloomberg New Energy Finance (BNEF), which just published its Electric Vehicle Outlook 2018 report.

EV sales will top 1.6 million in 2018, up from just a few hundred thousand in 2014, according to BNEF. The acceleration in sales can be chalked up to a few factors. First, battery costs have declined by 79 percent since 2010, falling from over $1,000 per kilowatt-hour to just $209/kWh at the end of 2017. Energy density has also increased by 5 to 7 percent each year. Costs could drop to as low as $70/kWh by 2030.

Second, governments continue to support EVs with various forms of subsidies or other policy help.

The third reason can be summed up in one word: China. Roughly 21 percent of all EV sales in 2017 occurred in just six Chinese cities. China is offering an array of carrots, but also sticks, including restrictions on buying and using gasoline or diesel vehicles. By 2025, China will account for roughly half of the entire global EV market.

Another reason is the proliferation of new EV models from a long line of automakers. The number of EV models is expected to nearly double from 155 at the end of 2017 to as many as 289 by 2022.

Obviously, it isn’t all rosey for the EV industry. EVs still only account for less than 2 percent of the auto market in most of the world. There is also a lack of recharging infrastructure in most markets.

Meanwhile, key ingredients used in lithium-ion batteries, such as cobalt, have seen costs skyrocket as demand has increased. Without significant investment in new cobalt capacity, for instance, there could be shortages within a few years. “If capacity does not grow as planned, cobalt prices could continue to spike and there could be a major cobalt shortage,” BNEF analysts said. “This would have serious implications on the electric vehicle market.” Related: India To Saudi Arabia: We Need Stable And Moderate Oil Prices

Cobalt prices have already tripled in the past two years, and with supply lagging demand, prices could continue to rise. The problem is all the more worrying because new mines have long lead times, which sets the market up for some serious speed bumps in the early 2020s.

Nevertheless, the BNEF forecast is bullish for EVs. Sales are expected to continue to accelerate, topping 11 million units by 2025 and 30 million by 2030. By 2040, EV sales will hit 60 million, or about 55 percent of the global market for light-duty vehicles. Cumulatively, about 559 million EVs will be on the roads in 2040, or about a third of the global fleet.

On an unsubsidized basis, EVs will hit cost parity with gasoline- and diesel-powered vehicles by about 2024, causing the latter to see declining sales after that point “as EVs bite hard into their market,” BNEF says.

Many of the BNEF projections are similar to last year’s report, although some of the near-term projections appear more bullish. But one of the more eye-opening forecasts is for electric buses. Consider this statement: “The advance of e-buses will be even more rapid than for electric cars,” BNEF concluded.

Electric buses will reach cost parity with conventional municipal buses as soon as next year, BNEF says. And whereas EVs will capture 28 percent of the market by the late 2020s, e-buses will “dominate” its segment, making up 84 percent of the bus market by the same date. “China has led this market in spectacular style, accounting for 99 percent of the world total last year. The rest of the world will follow, and by 2040 we expect 80 percent of the global municipal bus fleet to be electric,” Colin McKerracher, lead analyst on advanced transportation for BNEF, said in a statement. Related: Washington Threatens Sanctions For Nord Stream 2

What is the upshot for crude oil? The penetration of EVs into the light-duty vehicle market will erase 7.3 million barrels per day of oil demand by 2040.

Oil prices are largely determined at the margins, with small discrepancies between supply and demand responsible for wild swings in prices. In that context, while demand will still be enormous in 10 or 20 years, the demand destruction stemming from EVs and e-buses present a mortal threat to high oil prices.

And, as has been routinely the case in the past, clean energy forecasts tend to underestimate the pace of adoption and cost declines, which means the threat to oil demand could be much larger than forecasts published in 2018 might suggest.

By Nick Cunningham of Oilprice.com

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  • Peter Breedveld on May 21 2018 said:
    This article assume battery cost will keep falling. However, I can't see this as economy of scales have already been reached and prices are unlikely to keep falling because Moore's Law does not apply to batteries.
  • Mark Urbanski on May 21 2018 said:
    so by 2030 oil consumption will rise by 20 million barrels a day minus 7 million per day from EV sales... interesting. Never mind that nasty depletion part. There will need to be a lot more oil pumped and discovered in that time frame... I am all for EV and alternative environmentally sound choices and would like to see the Oil consumption go way down... but cutting into the oil consumption is going to require drastic measures.
  • Tom on May 21 2018 said:
    Electric transportation seems to be the best way to achieve improved air quality in American Cities. While significant air quality improvements could be achieved with more ethanol blending in our gasoline supply, the EPA, API and American Refining Industry are continually fighting this simple, cost effective approach. So we will probably not get cleaner fuels or air with the EPA or our Oil Industry in charge, and will need to go electric to improve our air quality and get away from Benzene laced fuels. Oil Industry Greed and Stupidity would appear to be the Oil Industry's biggest enemy, rather than electric cars.
  • (less)Disgruntled on May 21 2018 said:
    By 2040, we will need every bit of contribution that may come from an expanded EV fleet. Off the top of my head, I think global oil demand by then will be somewhere around 130 million bopd. Yikes! Of course, most of the electricity used to power those EVs will come from burning natural gas. Remember, something has to flow, blow, or glow to generate electricity and there never will be enough blow and flow to power such an expansion of EVs. Hydrocarbons . . . thank God they were created. Literally.
  • Douglas Buckland on May 21 2018 said:
    Is the price of the batteries which is the issue or their efficiency?
  • Bill Simpson on May 21 2018 said:
    EVs might cause the demand for oil to level off, but it won't decline for at least a couple more decades. By then, many traditional oil fields will be in rapid terminal decline.
    EVs aren't as cheap as gasoline powered ones, so people in poorer countries, which are most people on the planet, will still buy internal combustion powered cars until the cost of gasoline goes way up.
    Many things besides cars use oil. Here is a short list: trucks, ships, railroad locomotives, airliners, farm machinery, construction equipment, billions of small power tools, mining trucks and equipment, and the global military. You need oil to pave many millions of kilometers of asphalt roads. Roofing shingles use millions of tons of oil products. Tires are made out of oil, as are millions of other plastic products.
    Oil demand will remain strong until it runs out. Decades before that, civilization will be in trouble because oil is so essential for so many things, especially transportation. Not being able to buy all the oil energy we need will force the economy to shrink. Our banking and financial system is not designed to function for long in a shrinking economy. It will probably collapse soon after peak global oil production is reached. Fracking & horizontal drilling probably pushed that date back about 10 to 20 years. We would need a massive study of the oil industry to narrow down the date further. No organization has the power to conduct such a study because countries and private companies won't produce all their data.
  • Cyril Braithewaite on May 21 2018 said:
    Here we go again attempts to talk down the oil market with words like "Could" , "Might", "May" this is just like Brexit again. Why cant these fantasists grasp the simple fact that oil runs the world and always will. Where will they dispose of all these batteries when they reach the end of their lives ...landfill ??? Oh my I hope not landfill !!! and just how many tons of batteries are needed on a truck to haul hundreds of tons of freight across nations, how many tons of batteries are needed on an airplane to make sure it doesn't fall out the sky halfway across an ocean. Right now the oil price is set to surge to $100 possibly more. China & India economies are taking off again. Without oil the world will go back to the dark ages and very quickly.
  • Aghast on May 21 2018 said:
    The technology and economics required to bring about the changes you suggest do not exist, and if they were to exist, they would not be shared with us due to the adverse impacts to the existing providers. We are all locked up and have NO CHANCE, until the corporations are broken up and the government reigned in.

    We have a conflict of interest here because what incentive do corporations have to improve their service to customers if there is no competitor in the field of comparable size? Innovation disappears, cronyism takes over and freedom is lost.

    When the economics of electricity vs. combustion evolve to such a level that they are comparable, there will be more electric lawn mowers for sale than gasoline powered lawn mowers.

    Lithium batteries are hazardous and not economical or environmentally friendly.
  • Richard Rae on May 22 2018 said:
    So, where is the electricity generation coming from to charge these millions of batteries? What does the Bloomberg office full of engineers - aka a crystal ball- say? Is it through journalist magic?
  • Beth on May 22 2018 said:
    People have been trying to predict the future for YEARS. I feel it’s best to just live a daily life - being grateful for each day. No one knows the future of oil. For now, it’s here to stay. I personally believe we try too hard to advance technology. Sometimes it creates more problems than solutions. I think that’s what will happen with EVs. Just my opinion - means nothing to anyone but me.
  • Billyjack on May 22 2018 said:
    Electric vehicles will only become viable when one can charge while driving through some sort of hot rail on major thoroughfares. Once that is done then we will need to burn around 3 times the btus in coal to replace the 7 million barrels of BTUs that we are no longer using.
  • Tor Gavem on May 22 2018 said:
    If bitcoin mining now consumes as much electricity as the country of Austria, the energy need for IT services will more than make up for the savings with EV vehicles.
    If EV vehicle bullish expansion is half of what Bloomberg predicts due to the price of an EV vs regular cars. Median income in the US is less than $40k/yr, therefore EV vehicle in the US will have a cap. Same with China, people in rural areas make less than those in cities and will not buy used EV cars. Note, Tesla want to sell their high cost Model 3 for $78,000 that is not small chips for your average car buyer. Prius and Nissan Leaf are more affordable but......still expensive.
    Therefore, total consumption of BTU or kWh will outpace the savings from EV cars.
    So instead of looking through a small window, need to look at total BTU consumption and kWh vs need in all industries and renewable energy, hydropower and oil & gas. It is complex.
  • Mamdouh G Salameh on May 22 2018 said:
    Your conclusion that electric vehicles (EVs) could erase 7.3 million barrels a day (mbd) of global oil demand by 2040 is based on two hypothetical assumptions: one is that we could have some 559 million EVs on the roads by 2040. The other is that the car manufacturing industry could raise its production capacity of EVs from the current 500,000 EVs to 559 million EVs by 2040.

    And since the two assumptions are very far from reality, then by definition your conclusion is equally far from reality and I will explain why.

    Global oil consumption is projected to hit 100 million barrels a day (mbd) next year rising to 120 mbd by 2040 and accounting for 33% of global primary energy consumption in 2040 as it did in 2017 despite rising global oil production and consumption.

    Transport and electricity generation are the two biggest sectors in the global primary energy consumption accounting for 30% and 40% respectively.

    A few experts have been projecting the advent of the post-oil era within the next fifty years. They are now saying that widespread electric vehicle use could spell the end of oil. The tipping point, they reckon, is 50 million electric cars on the roads. This they believe could be reached by 2040.

    Currently, electric 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 large 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.

    As explained above, by 2040 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 7.3 mbd your article indicated. This will neither be the end of oil nor a tipping point.

    A tipping point could only be reached once 1.395 bn EVs (50% of the current global number of ICEs in 2040) are on the roads worldwide within the next fifty years. This is impossible to achieve within that time frame.

    Your second assumption that the car manufacturing industry could produce 559 million EVs by 2040 is not realistic. Current worldwide production of EVs and hybrids amounts to 1 million vehicles of which only 500,000 are EVs and the rest are hybrids. So it will take many decades to manufacture 50 million EVs let alone manufacturing 559 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 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
  • Bill Smith on May 22 2018 said:
    So the headline could also be written as electric vehicle dominance could reduce global oil daily oil consumption by 6%, constituting a mortal threat to high oil prices. Doesn't make much sense when written like that.....

    I realize that excessive hyperbole and journalism are joined at the hip these days, but a professional publication should strive to do better.
  • Justin on May 22 2018 said:
    I find the title and conclusion misleading. "EVs could erase 7 million bpd in demand." You further state this will happen "by 2040." That implies that current demand will be lessoned.

    One needs to merely look at the data to see it will simply slow the rise in demand, not "erase" demand.

    Certainly 559 million EV vehicles in 2040 will bite into demand. But keep in mind by 2035 there is expected to be 2.0 billion vehicles on the road (1.2 billion now) and its fairly likely that the current ICE (internal combustion engine) fleet will increase from 1.2 billion today to around 1.6 billion by 2040. This will obviously represent an increase in oil demand, not a decrease.

    So even given these EV figures are all very optimistic and bullish they still won't reduce oil demand below present rates in the next 30-40 years.
  • Brent Delta on May 22 2018 said:
    All these clever clogs who say electric transportation is the future are not engineers but pea brained fantasists. To charge millions of batteries everyday, you need power from your national grid which runs on largely on gas, diesel, coal etc. Your national power system can barely cope with general domestic demand let alone the additional load introduced from millions of batteries to charge. Without year of building new infrastructure to support this idiotic pipe dream it just ain't going to happen. Batteries only have a limited amount of charge/discharge cycles and battery capacity falls off with the number of cycles so the very ambitious quoted ranges of these cars, planes, trucks etc may be 3 hours but within 6 months they will be 30 minutes with all the charging they will need. The toxic waste produced from spent cells is lethal to our planet, far worse than diesel cars and generators but I am guessing this is all too complex for our young greens to understand.
  • Francisco James on May 27 2018 said:
    I see no EV drama. In round numbers, current global oil demand is 100 mbpd, growing at 1 mbpd each year, with little EV impact. At that rate, by 2040, global oil demand may reach 122 mbpd before adjusting for EVs wiping out 7 mbpd, for an EV-adjusted demand of 115 mbpd.
    Furthermore, once we consider depletion and replenisment reality, there is even less drama. Production for existing rigs drops about 6% each year, so we must bring over 6 mbpd of replacement above the 1 mbpd of demand growth -- for a total of 7+ mbpd new production every year. Between 2018 and 2040 you can calculate we need (22 years x 7 mbpd =) 154 mbpd of new production, before adjusting for the 7 mbpd reduced by EVs -- for an adjusted new production of only 147 mbpd. In summary, the 7 mbpd loss to EVs accounts for a single year of new production between today and 2040. I see no EV drama.
  • sama igol on June 15 2018 said:
    From the early concepts of its early designs in the 17th century to what we have now in our modern cars, the Internal combustion engine, is now a staggering more than 2 centuries old , and the ICE still going strong and its the dominant in automobile and military vehicles power train and in electric energy generation, this is pivotal technology no one can easily retire unless he invents a whole new transportation system. the way cars functions today can be traced back to the early days of engines was invented, what happened in the course of 200 years is just upgrades to make the ICE and cars more efficient that's it.

    Another example of pivotal technology is the rifles its more than 500 years technology and still follow the same basic principles in the modern rifles, with modification to make the bullet faster and accurate and to make the reloading faster, nobody can claim that he can make a gun that shoots after charging it from wall socket.

    Any analyst supports the idea that Mr. Musk have the ability to erase a huge technology by just modifying it. is a simple minded with zero intelligence or just another bribed crook.

    And the proof that my analysis is 100% correct, Mr.Musk himself is started to promote his new ideas about a whole new transportation system, by introducing ( the boring company) and the hyperloop concept.
  • sama igol on June 15 2018 said:
    From the early concepts of its early designs in the 17th century to what we have now in our modern cars, the Internal combustion engine, is now a staggering more than 2 centuries old , and the ICE still going strong and its the dominant in automobile and military vehicles power train and in electric energy generation, this is pivotal technology no one can easily retire unless he invents a whole new transportation system. the way cars functions today can be traced back to the early days of engines was invented, what happened in the course of 200 years is just upgrades to make the ICE and cars more efficient that's it.

    Another example of pivotal technology is the rifles its more than 500 years technology and still follow the same basic principles in the modern rifles, with modification to make the bullet faster and accurate and to make the reloading faster, nobody can claim that he can make a gun that shoots after charging it from wall socket.

    Any analyst supports the idea that Mr. Musk have the ability to erase a huge technology by just modifying it. is a simple minded with zero intelligence or just another bribed crook.

    And the proof that my analysis is 100% correct, Mr.Musk himself is started to promote his new ideas about a whole new transportation system, by introducing ( the boring company) and the hyperloop concept.

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