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Oil Consumption Is Immune To A Transport Transformation

96 percent of new vehicle sales in 2016 featured combustion engines

The implementation of electric vehicles and ride-sharing may have long-term effects on oil demand, but the speed at which changes to the vehicle fleet takes place are likely to ensure that it happens at a slow pace, according to a report by IHS Markit.

While IHS and many other prevailing long-term global energy forecasts expect oil demand to continue to grow over the next two decades, the potential for disruptive changes to transportation—a sector that accounted for half of the 96 MMBOPD of oil consumed globally in 2016—have added a level of uncertainty, according to IHS Canadian Oil Sands Dialogue report.

Transportation sector changes: peak oil demand, or just a beginning?

The report says that the potential proliferation of increasingly stringent vehicle ownership and use policies, changes in consumer behavior, new technologies and the pace of economic growth, as well as the impacts of new mobility models such as ride hailing services and autonomous vehicles are key sources of uncertainties facing global oil demand. The combination of these factors could foreseeably lead to a peak in oil demand or, alternatively, lead to it reaching new heights.

Regardless of how these factors play out, the gradual nature of transitions and the long life of the existing on-road fleet means that the impact on oil demand will likely be at a measured pace, the report says. Even in 2016, 96 percent of all new vehicle sales featured a combustion engine. IHS Markit estimates the average vehicle life globally to be about 15 years, which means that the impact of new vehicle technologies is expected to take time to materially affect the vehicle fleet and overall fuel demand.

“When we look at the future of the car and the impact of key factors such as electric vehicles sales, we see the slow turnover rate of the global vehicle fleet muting the effect of new technologies on global oil demand,” said Kevin Birn, director for IHS Energy who leads the Oil Sands Dialogue. “However, the future of the car—and the sources of energy that propel them—is certainly not predetermined and the potential exists for the future to surprise—up or down.” Related: Will The Climate Crisis Spread Financial Chaos In Oil and Gas?

IHS believes that oil sands will continue to play a key role in meeting future oil supply. Since production from oil sands facilities does not decline, future investment into projects results in growth, the report says.

“Looking ahead to future automotive demand for refined products and, in turn demand for crude oil, it is easy to fixate on one or two factors. But this misses the larger picture,” said Tiffany Groode, IHS Energy senior director.

“More likely, the future for transportation will come from a variety of variables, from economic activity and government policy, to shifting consumer preferences. Navigating this uncertainty and understanding how numerous variables will interact and influence one another will be pivotal.”

By Oil & Gas 360

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  • Dan on December 22 2016 said:
    The future of the car may be bleak as 90% of what I see are large and larger pick up trucks and SUV's.
  • Peter on December 23 2016 said:
    Electric cars do not make sense. They have a limited range and you have to have access to a reliable electrical grid which much of the world does not have. Also batteries don't work well in cold weather so when these cars are parked they heat the battery using more electricity.
  • Bill Simpson on December 23 2016 said:
    There is no way to predict how long, or how fast, the demand for crude oil will grow. It mostly depends on economic growth rates in the underdeveloped world. How many gasoline cars will the billions of people there be able to afford? How many of them will be flying around in jets for business, or on vacation? How many cruise ships will be built? Will world trade grow, or shrink? Will people send their self driving cars to pick up donuts or pizza often? Will space travel become common? How many additional kilometers of roads will be built? Will self driving lawnmowers let me mow my grass every 4 days? (It grows fast in the tropical southern heat.)
    The only thing we know for certain is that oil is a finite resource on which we have allowed ourselves to become dangerously dependent. If we wait to electrify most transportation until oil begins to decline in supply, avoiding a collapse of our industrial civilization will be virtually impossible. We don't have a lot of time left.
  • Rob Levesque on December 23 2016 said:
    Short term predictions is that by 2022 you can buy an electric subcompact that goes 200 miles on a charge for cheaper than a gas car.
    By 2030 all new vehicles will be electric. According the technology cost curves and improvements. 200 mile range is the game changer. It starts in 2017 with the model 3, bolt, Leaf etc...can't wait.
  • David Hrivnak on December 31 2016 said:
    Peter you obviously have not driven an electric car as they solidly out perform their gasoline counterparts. Now all our cars have a plug and I have driven 53,000 gasoline free miles. We now have rooftop solar and so we now we make our own fuel for most of those 53,000 miles. Try that in a gas powered car.

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