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2017-10-26

The impact of electric cars on oil demand




The global car fleet: 2015-2035 (billions)

Rising prosperity will boost car ownership, especially in emerging markets. Meanwhile, fuel efficiency targets and lower battery costs are likely to spur electrification
Spencer Dale, group chief economist, talks about rising levels of car ownership in emerging markets
We expect oil demand to continue to grow throughout the next 20 years, driven by increasing transport demand, particularly in fast-growing Asian economies. (Spencer Dale, group chief economist)
In the base case forecast, the global car fleet is expected to double from 0.9 billion cars in 2015 to 1.8 billion by 2035 as rising incomes and improving road infrastructure boosts car ownership. Within the same timeframe, the non-OECD fleet will triple - from 0.4 billion cars to 1.2 billion.
Overall, global demand for car travel roughly doubles over the course of the Energy Outlook.
The number of electric cars also rises significantly, from 1.2 million in 2015 to around 100 million by 2035 (6% of the global fleet). Around a quarter of these electric vehicles (EVs) are plug-in hybrids (PHEVs), which run on a mix of electric power and oil, and three-quarters are pure battery electric vehicles (BEVs).
A key driver of the pace at which EVs penetrate the global car fleet is the extent to which fuel economy standards are tightened. But EV penetration will also depend on a number of other factors, including:

  1. the pace at which battery costs continue to fall;
  2. the size and durability of subsidies and other government policies supporting EV ownership;
  3. the speed at which the efficiency of conventional vehicles improves; and - crucially - on
  4. consumer preferences towards EVs.

Fuel demand for use in cars continues to rise, despite efficiency improvements and EV switching.
In 2015, cars accounted for 19 Mb/d of liquid fuel demand - a fifth of global demand. All else equal, a doubling in the demand for car travel over the coming 20 years would lead to a doubling in the liquid fuel demand from cars.
However, improvements in fuel efficiency reduce this potential growth significantly (by 17 Mb/d) as manufacturers respond to stricter vehicle emission standards. In the base case forecast, the number of electric vehicles rises significantly, from 1.2 million in 2015 to around 100 million by 2035
In 2015, cars accounted for 19 Mb/d of liquid fuel demand - a fifth of global demand


Illustrative path for battery pack costs ($/kWh)

For a battery electric vehicle with a 60 kWh pack. Cost projections depend heavily on the degree of EV uptake, which is uncertain, so ranges should be treated as illustrative only. Current estimates of battery costs also vary widely, but this uncertainty is not shown
Battery pack costs are likely to fall in the coming years, but the pace and extent of this fall is uncertain
The growth of electric cars also mitigates the growth in oil demand, but the effect is much smaller: the 100 million increase in electric cars reduces oil demand growth by 1.2 Mb/d. By comparison, this is around a 10th of the impact of the gains in vehicle efficiency.
Overall, the increase in demand for car travel from the growing middle class in emerging economies overpowers the effects of improving fuel efficiency and electrification, such that liquid fuel demand for cars rises by 4 Mb/d - around a quarter of the total growth over the Outlook.