Daily Management Review

How The Demise Of The Oil Age Is Being Accelerated By Electric Vehicles


How The Demise Of The Oil Age Is Being Accelerated By Electric Vehicles
At the COP28 climate summit in Dubai, there is a lot of hand-wringing over how slowly fossil fuel consumption is being reduced in order to combat climate change. Nonetheless, delegates might highlight the expanding global fleet of electric cars, which is already significantly reducing demand.
As governmental subsidies and improved technology help consumers get past the often eye-popping sticker prices for battery-powered automobiles, growing sales of electric vehicles in recent years have pushed forecasts to accelerate their projections for when global oil demand would peak, industry experts say.
The International Energy Agency (IEA), a consortium of 29 developed countries headquartered in Paris, projects that global oil consumption will peak at 103 million barrels per day by the end of this decade. This estimate has been revised downward from the IEA's 2017 prediction of a peak of roughly 105 million barrels per day in 2040.
"The game-changer has been the policy support for the shift to electrification quite substantially reducing oil demand from transportation sector, which has been the key driver of global oil demand growth," said Apostolos Petropoulos, an energy modeler at the IEA.
The world's two largest oil consumers, China and the United States, have revised down their estimates for domestic consumption while oil major BP has increased its estimates for the world's peak oil demand.
According to the IEA, transportation accounts for over 60% of global oil demand, of which 10% is accounted for by the United States alone. This percentage should decrease since, by 2030, the IEA projects that EVs will have eliminated almost 5 million barrels of daily global oil demand.
According to the IEA, global sales of electric vehicles (EVs) currently account for 13% of all vehicle sales, but by the end of the decade, they are expected to account for 40%–45% of the market.
This is because, since the 2015 Paris Agreement, governments from all around the world have combined to impose ever-tougher efficiency standards and subsidies in an effort to keep global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) beyond pre-industrial levels.
The most recent subsidy initiatives include the $7,500 tax credit for buying a new electric vehicle (EV) under the U.S. Inflation Reduction Act, which was passed last year and is meant to somewhat offset high sticker prices.
Even if such figures are significant, the IEA has stated that in order to meet the Paris Agreement's temperature objective by 2030, EV sales would need to account for roughly 70% of the market.
It's unclear if sales can reach those heights.
In response to growing labour costs and indications that rising interest rates are impeding growth in the US, EV manufacturers, including General Motors, Ford, and Stellantis, have recently postponed or abandoned plans to increase production.
Longer term, however, some academics are optimistic due to declining EV battery costs.
Industry analysts predict that the cost of EVs and the accessibility of charging stations will have a significant impact on the pace of future EV adoption. China has the upper hand in both situations.
In mid-2023, the average cost of an electric vehicle in China was 31,165 euros ($33,964), as reported by UK research firm JATO Dynamics. According to JATO, the most affordable electric vehicle in China was 8% less costly than its similar gasoline-powered counterpart.
This is due to significant government funding as well as the simple access to rare earth elements, which are essential for the development of electric vehicles.
About 25% of the market in China is made up of EVs, and the nation is predicted to drive worldwide expansion.
On the other hand, an electric vehicle (EV) typically costs more than $53,000 in the United States, which is around $5,000 more than the cost of a gasoline-powered vehicle, according to automotive research firm Kelley Blue Book.
When it comes to the overall quantity of public charging stations, the United States falls far short of China. According to an industry-funded white paper published by the Electrification Institute in October, there are roughly 52,000 public charging stations in the United States, 400,000 in Europe, and 1.2 million in China.
Nevertheless, the IEA projects that by 2030, up to 50% of new automobile registrations in the United States will be electric vehicles (EVs), as consumers become more attracted to the vehicles' evolving features, declining costs, and the possibility of avoiding fluctuating petrol prices.
"Change on the political side could delay the transition," said the IEA's Petropoulos, referring to concerns among some EV makers that next year's U.S. election could usher in a new set of policies. "But ultimately the transition is happening now."