Oil: How Electric Vehicles Hasten the End of the ‘Black Gold’ Era

There was a lot to think about at the COP28 climate conference in Dubai slow rate of consumption reduction fossil fuels combat climate change. But one positive element that delegates can mention is growing fleet electric vehicles worldwide, which has already brought a surprisingly large drop in demand.

The increase in sales of electric cars recent years have led analysts to accelerate their predictions of when global oil consumption will peak public subsidies and improved technology help consumers overcome the sometimes exorbitant prices of battery-powered cars, according to industry experts.

The Paris-based International Energy Agency (IEA), made up of 29 industrialized countries, expects global consumption oil arrive at zenith at the end of this decade, in 103 million barrels per dayafter regularly adjusting its 2017 forecast by nearly 105 million bpd in 2040.

“The game that changed the situation was political support transition to electrification, which relatively significantly reduced the demand for oil from the transport sector. It was the main driver of the rise in global demand for the “black gold”, said Apostolos Petropoulos, an energy modeler at the IEA.

Oil giant BP advanced in its predictions for a global peak in oil demand, while the governments of both USA as well as China – of the world’s two largest oil users – have decreased their domestic consumption forecasts. Transportation accounts for about 60 percent of global oil demand, with the U.S. accounting for only about 10 percent, according to the IEA. That share is expected to decline as the IEA expects electric vehicles to remove about 5 million barrels per day from global oil demand by 2030.

Uncertain how sales will move

Worldwide sales of electric cars are currently approx the 13% of all vehicle sales and likely to rise 40-45% of the market by the end of the decade, according to the IEA. This is due to a mixture of increasingly stringent performance standards and subsidy enacted by various governments around the world following the 2015 Paris Agreement to limit global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above pre-industrial temperatures.

Among the latest subsidy measures in the US are $7,500 tax credit to buy a new electric car that was approved last year to offset the high sticker prices of the American Inflation Reduction Act.

While the numbers are large, the IEA said sales of electric vehicles would need to be even higher – on the order of 70% of the market by 2030 – to meet the Paris Agreement’s goal of limiting global warming.

Whether sales can reach those heights remains to be seen uncertain.

Electric vehicle manufacturers, including General Motors, Ford and Stellantis, in recent weeks they delayed or withdrew plans to speed up production amid rising labor costs and signs that higher interest rates are slowing US growth.
However, in the long run, the falling cost of EV batteries has some researchers optimistic.

Cheaper in China

The pace of future adoption of electric cars will largely depend on their prices and availability of charging stations, according to industry experts. China has advantages in both respects.

The average price of an electric car in China 31,165 euros ($33,964) by mid-2023, according to British research firm JATO Dynamics. The cheapest electric car in China was 8% cheaper than the cheapest equivalent petrol car, JATO found. This is caused by massive state subsidies and the easy availability of rare earths that are vital to the production of electric vehicles.

About 1/4 of the market in China is electric vehicles, and the country is expected to lead global growth.

Where the US falls short of China

In contrast, in the US, the average price of an EV is gone $53,000, according to automotive research company Kelley Blue Book, approx $5,000 more than a gas car.

USA they fall behind also much in relation to China in total number of public charging stations. An industry-sponsored survey showed that they own approx 52,000 public charging stations, Europe around 400,000 and China around 1.2 million.

Even so, electric cars are expected to reach up to 50% of new car registrations in the US by 2030according to the IEA, how drivers are attracted to improving technology, falling prices and prospects for avoiding price fluctuations on petrol pumps.

“A change on the policy side could delay the transition,” said the IEA’s Petropoulos, citing concerns among some EV makers that next year’s U.S. election could bring a new set of policies. “But finally the transition is happening now.

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