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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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Will 1 Billion EVs Crash Gasoline Demand?

EVs

Vehicle fuel consumption should see a major decline globally, but it won’t happen for a couple of decades.

Last year was big on announcements from automakers, and suppliers, and tech giants regarding electric vehicles, robotaxis, and autonomous vehicles. We also heard from countries like China, India, France, Great Britain, and Norway—all pledging to ban the sale of fossil fuels to power vehicles on their roads.

How will this affect auto sales, gasoline, diesel…?

Morgan Stanley has long sounded the warning bell to the auto industry. A study last year forecasted that electric vehicles will make up 90 percent off all vehicle sales globally by 2050. That would be made up of about one billion battery electric vehicles out on roads worldwide.

That will be spurred in part by existing and proposed emissions legislation that will jack up the cost of manufacturing internal combustion engines. EVs with long-range, fast-charging batteries will become much more viable for global auto sales. Growing consumer interest is expected to follow.

The investment firm warns that this will have a big impact on component suppliers, semiconductor manufacturers, commodities, chemical producers, and players in capital goods.

Even if vehicles continue to become more electrified and fuel efficient, petroleum consumption will continue to grow, with markets like China and Russia leading the way. Related: Iranian Oil Tanker Engulfed In Flames Following Collision

Global new vehicle sales are growing larger every year, and that won’t change anytime soon. BMI Research forecasts that global auto sales will go up 3.6 percent in 2018, up from an estimated 3.3 percent growth percentage in 2017.

The sales trend has been a few years in the making. Macquarie Bank reported that 88.1 million cars and light vehicles were sold in 2016, up 4.8 percent from a year earlier.

China is expected to continue growth as the world’s largest auto sales market, with a slowdown expected. Japan should see acceleration in its new vehicle market, as well.

Auto analysts are keeping a nervous watch over what may happen to the North American Free Trade Agreement, with U.S. President Donald Trump expected to block its renewal. Trade ministers from the U.S., Canada, and Mexico agreed late last year to extend talks on the NAFTA renegotiation into the first quarter of 2018.

Automakers are concerned that the Trump administration may break apart the regional alliance, which has been pivotal in reducing the cost of vehicle manufacturing and making supply chain logistics more efficient.

The U.S. Energy Information Administration expects energy consumption by light-duty vehicles in the U.S. to see a real drop between 2018 and 2040. Improvements in fuel economy should more than offset increases in light-duty vehicle miles driven over that period of time. Related: Bioplastics Threaten Big Oil

Fuel economy has stayed flat in the U.S. lately. While there are a lot more electric cars, hybrids, and fuel-efficient gasoline-powered cars than a decade ago, sales of pickup trucks, SUVs and crossovers have taken away fuel economy gains.

The University of Michigan’s Transportation Research Institute reported that the average sales-weighted fuel economy, calculated from the monthly sales of individual models of light-duty vehicles, has stayed flat near 25 mpg over the past two years.

Bottom line: Petroleum consumption should drop significantly over the next two decades. But for the next few years, global vehicle fuel consumption will likely continue to increase.

By Jon LeSage for Oilprice.com

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  • Mamdouh G Salameh on January 08 2018 said:
    Having one billion electric vehicles (EVs) by 2050 is the biggest pipedream one could imagine. Even if countries like China, India, France, Britain and Norway ban the sale of Internal Combustion Engine (ICEs), it will not happen.

    Let us look at the facts. First it is impossible for car manufacturers to produce one billion EVs by 2050. Still let us assume that by 2050 we will have 50 million EVs on the roads worldwide. This will constitute 1.8% of 2.790 billion ICEs projected on the roads by 2050.

    In 2017 the world used 36 bn barrels of oil (bb) of which 90% 32 bb were used to power 1.477 billion ICEs around the world. Bringing 50 million electric cars on the roads by 2050 will reduce the global oil demand by only 1.1 bb, or 3.4%. This will neither be the end of oil as some experts are suggesting nor a tipping point.

    Growth in EV sales thus far has been supported by significant government subsidies. Sales would crash once the subsidies are withdrawn.

    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 tipping point for oil could only be reached once 739 million EVs (50% of the current global number of ICEs) are on the roads worldwide within the next fifty years. This is impossible to achieve within that time frame.

    In conclusion, there will never be a post-oil era. Oil will continue to reign supreme throughout the 21st century and maybe far beyond.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Good News on January 08 2018 said:
    Good news.
  • hall monitor on January 09 2018 said:
    Forecasting 1 billion electric LDVs (light duty vehicles - cars, SUVs, pickups, etc) in use globally by 2050 is probably optimistic, but it is certainly not impossible as claimed (without any basis) in a comment by Salameh. Further, that comment was erroneous in multiple claims.

    "First it is impossible for car manufacturers to produce one billion EVs by 2050." On what basis is that claim made? Presently global LDV production hovers around 90 million units annually and is projected to grow to roughly 120 million annually by BNEF by 2040. Further, they estimate that BEV LDV will represent ~30% (~40 million units) of those sales by 2040, with continued growth seeming likely thereafter. Extrapolating, based on BNEF estimates, BEVs on the road by 2050 will probably exceed 500 million and may be approaching 1 billion (although the higher number does seem improbable).

    The Salameh comments then offer several flawed calculations based upon a projection of a total of 50 million LDVs on the road by 2050, again with no basis. In contrast, BNEF forecasts imply that BEV production could approach 50 million units annually by the early 2040s.

    "In 2017 the world used 36 bn barrels of oil (bb) of which 90% 32 bb were used to power 1.477 billion ICEs around the world." 36 bn boe and 1.5 billion ICE vehicles appear to be approximately correct numbers (if we exclude 2 & 3 wheel vehicles - a point not made by the comment). But, all mainstream estimates of oil use by sector have transportation using roughly 60% to 65% of oil consumption, not 90% as claimed.

    I could continue at length. In a nutshell, the Salameh comments are seriously flawed and the stated claims are questionable at best and, most respects, completely incorrect.
  • snoopyloopy on January 11 2018 said:
    Hard to take this analysis serious when it makes the fatal flaw of only focusing on light-duty passenger vehicles, even though the switch to electric of heavy-duty vehicles will dwarf the savings in the passenger segment. EVs don't have to take ALL the demand for oil away to wreck the market. And this isn't even addressing automation.

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