There was some discussion on the WPL thread (disclosure: I am a...

There was some discussion on the WPL thread (disclosure: I am a WPL shareholder) about the impact electric vehicles might have on overall global oil demand going forward.

In keeping with the title of this thread,  I thought it might be relevant to this thread:


What is your view re the impact upon oil prices of electric vehicles? Will demand for oil be significantly hit, say in 10yrs time, or is this not a concern from your point of view and the research you have come across?
Appreciate any information that you or others wish to share.

In my experience, having contemplated the global energy question in some depth for several years, one of the greatest misapprehensions of it is that EV's will somehow be some kind of solution to the emissions problem, and will therefore kill off demand for oil.

I think that is because most people who think about EVs - or see them on the road - are affluent people living in the developed world, so they view the world through a very western-centric lens.

But what this myopic view overlooks is that, while there are about 1 billion people living in the developed world who are at the flattened section (shaded area denoted "A") of the S-curve of Resources/Energy Consumption (y-axis) vs GDP/Capita (x-axis), there are probably 5 billion or 6 billion of the planet's citizens only just coming into the bottom part of the curve (shaded area denoted "B"):


(Between GDP of US$5,000 per capita and US$25,000 per capita is the range in which precedence shows the consumption of resources and oil rising at an accelerating rate. For context, China is at about US$10,000 GDP/capita, so it still has a way to go before its energy/oil demand starts to plateau and India is only at US$2,000/capita, so it is not even in the zone of accelerating demand growth yet.)


For further context, passenger vehicles today account for just 20% of global oil consumption.

The rest is made up of:

Commercial Vehicles (trucks and buses) (25%),
Petrochemicals (14%)
Other Industries (13%)
Residential/Commercial/Agriculture (11%)
Aviation (7%)
Electricity Generation (5%)
Marine (4%)
Rail/Waterways (2%)



As can be seen from that table (sourced from OPEC's 2021 Wold Oil Outlook Report file:///C:/Users/mikeb/Downloads/WOO_2021%20(1).pdf ... and OPEC don't have any incentive to talk up the demand prospects for oil), demand from just about every sector is going to continue increasing over the next 25 years.

Including the Road category (of which Passenger Vehicles is a subset).

That's because:

1. The number of passenger cars globally is going to double in the next 25 years (and in non-OECD it is going to almost triple (that S-curve effect, remember):



Sure some of those additional 1.0bn vehicles will be EV's, but the overwhelming majority will still be internal combustion engines. So while EV's will certainly gain market share (off a teeny base, mind) the overall pie is still growing to such an extent that there will still be a meaningful net increase in ICUs going forward.

And then there is the commercial vehicle component of the overall Road sector.

There is going to be a doubling of the number of commercial vehicles:



And remember, per unit, commercial vehicles are greater consumers of oil products than passenger vehicles, because they are not only larger with far hungrier engines than passenger vehicles, but they are also economic assets which are much more utlilised than passenger cars (which spend most of their lives parked).

So despite the rapid market share gains expected from the growth in alternative fuel vehicles, including EV's, the number of conventional vehicles (the dark blue ares in the chart below) will still rise meaningfully for the next two decades:



[These are not the sort of figures one will easily encounter in the mainstream media and popular commentary.]


Conclusion:

To answer your question, if there is a risk to oil demand over the next 20 or 25 years, EVs is not it.

.