LOOKING AHEAD: Oil companies ponder the end of demand growth and the role played in it by electric vehicles

• Date: 01 April 2018
• Published date: 01 April 2018
• DOI: http://doi.org/10.1111/oet.12566

LOOKING AHEAD

Oil companies ponder the end of demand growth and the role

played in it by electric vehicles

The expression “peak oil demand”has been around for some

decades, but the idea was generally ignored as being either

impossible to predict or being so far in the future as not to

be worth bothering about. Now it is back on the agenda,

prompted in many cases by a series of announcements from

countries across the globe of plans to promote the wide-

spread use of electric vehicles. European countries have

been quick to announce proposals, but plans are being drawn

up in many other places, including Japan, China, India,

Canada, and most recently, Russia.

1|DEMAND DESTRUCTION

European interest in electric vehicles stems in part from

growing concerns over the harmful effects of emissions from

diesel vehicles, especially in urban areas. The matter

received especial prominence when in 2015, it emerged that

the German motor car manufacturer, Volkswagen, had

installed software in its diesel cars that was designed to

record lower levels of pollution than was the case under

actual driving conditions.

1

This in turn led to a wider debate

about the health hazards posed by particulates and nitrogen

dioxide from the use of diesel.

2

The discussion initially focused on the effect that repla-

cing diesel vehicles with electric ones might have on

demand for diesel fuel; but this has since widened out fol-

lowing proposals in some countries to phase out petrol-

driven cars. There are a number of factors to be considered

in trying to forecast the effect of electric vehicles on demand

for diesel and gasoline, including the rate at which electric

vehicles are taken-up; the type of electric vehicle (eg, pas-

senger, commercial, completely electric or hybrid) and the

way in which these vehicles are used. One of the things elec-

tric vehicles are forecast to promote is the sharing of vehi-

cles. Another factor, which remains unclear at present, is to

what extent the ban on diesels will also apply to petrol

vehicles.

BP has recently considered a number of scenarios cover-

ing the role of electric vehicles along with the increasing use

of renewable sources of energy. In one of them, the

Evolving Transition scenario, demand for oil continues to

grow at about 0.5% annually from 2016 to 2040, compared

with a growth rate of 1.2% between 1990 and 2016. The sce-

nario assumes that government policies, technology, and

social preferences continue to evolve in a manner and speed

seen over the recent past.

3

The scenario sees a continuing growth in demand for

transport fuels, although this is mainly from non-road trans-

port. Road transport energy demand grows at a slower pace

and much of the growth in that sector is from heavy goods

vehicles rather than cars. After 2030, the main source of

growth in the demand for oil comes from non-fuel use:

mainly as a petrochemical feedstock.

2|DIESEL OUTLOOK

There will nevertheless be an impact on diesel consumption,

especially in Europe, which could cause problems for its

already troubled refining industry which, despite recent

capacity reductions, still has an estimated crude distillation

surplus of 1 mn bpd.

4

One effect could be an increase in

gasoline consumption as several large cities impose bans on

diesel vehicles in their most congested areas. Motorists may

also be encouraged to switch to other forms of propulsion,

including gasoline, by other measures, such as changes in

fuel duties and other taxes.

Some sort of agreement is beginning to emerge among

industry forecasters that global oil demand will stop growing

somewhere between 2030 and 2040: a view not necessarily

shared by OPEC and some of its members. Saudi Arabia’s

Energy Minister, Khalid al-Falih, maintains that people in

developing countries are likely to prefer the internal combus-

tion engine to electric-powered vehicles; and heavy goods

vehicles are expected to remain oil-driven for some time. In

parts of Central and Eastern Europe, the consumption of die-

sel fuel is going up, partly by the growing use of second-

hand diesel cars abandoned by their mainly German owners

and shipped eastwards. Railways there are also losing busi-

ness to road vehicles. The main thing required for drivers to

switch from diesel to electric vehicles is the provision of an

DOI: 10.1111/oet.12566

14 © 2018 John Wiley & Sons Ltd wileyonlinelibrary.com/journal/oet Oil and Energy Trends. 2018;43:14–15.