Overall global oil demand for road transport will peak in 2027 as electric vehicle (EV) usage will surge in the coming years, BloombergNEF (BNEF) said Thursday.
The usage of EVs is already displacing demand for 1.5 million barrels per day (bpd) of oil, and this displacement “rises dramatically in the years ahead”, the research firm said in its annual Electric Vehicle Outlook report.
Demand for road fuel has already peaked in the USA and Europe, and is set to peak in 2024 in China, the report said. Global oil demand from two-wheelers, three-wheelers, and buses has also already peaked, while demand from passenger cars will peak in 2025. However, commercial vehicle demand for oil will take longer to peak due to the reliance of heavy trucks on diesel, BNEF said.
According to BNEF’s Economic Transition Scenario, oil demand from road transport will drop to 33.5 million bpd in 2040, around 21 percent lower than 2022 levels. Aside from the rising role of electric vehicles, fuel efficiency improvement of combustion vehicles and the uptake of shared mobility also have a significant part in reducing oil demand, the report said.
However, the fall in oil demand does not necessarily mean a collapse in oil prices, it said. Oil prices could remain volatile and high if investments in new supply capacity fall faster than demand, the report said. BNEF’s Net Zero Scenario, which accounts for additional demand from the electrification of heating, industry, and electrolyzer use for hydrogen, forecasts a steeper drop in oil demand in the process of a full phaseout from road transport in 2050.
According to the report, direct electrification via batteries is the most efficient, cost-effective, and commercially available route to fully decarbonize road transport. Fuel cell vehicles play a part, specifically in some “hard-to-electrify long-haul trucking applications but “play no meaningful role in the passenger vehicle market”, the research firm said. Also, synthetic fuels do not arrive at scale in time or at a price point needed to “have a material impact on road transport”, the report said.
Global EV Sales Projection
EV sales will continue to rise in the next few years, increasing from 10.5 million in 2022 to around 27 million in 2026, the report said, with EV share of global new passenger vehicles jumping from 14 percent in 2022 to 30 percent in 2026.
Shares in some markets could be much higher, with EVs reaching 52 percent of sales in the biggest country in Asia and 42 percent in Europe. In the USA, the Inflation Reduction Act could push EV passenger vehicle sales to 28 percent by 2026, according to the report. Japan “significantly lags” behind other countries in EV adoption, the report said. Fleet operators will see even quicker growth, increasing from 27 million passenger EVs on the road at the end of 2022 to over 100 million by 2026.
Meanwhile, sales of internal combustion vehicles peaked in 2017 and are now “in long-term decline”, the report said. By 2026, sales of combustion vehicles will be 39 percent lower than their 2017 peak, while the combustion vehicle fleet peaks in 2025, according to the report.
According to BNEF projections, EVs will reach 44 percent of global passenger vehicle sales by 2030 and 75 percent by 2040. After increasing rapidly from 2022 to 2035, EV sales growth will slow down slightly in the late 2030s in the main EV markets like Europe,the biggest country in Asia, and the USA as they begin to saturate, the report said.
Faster Progress Required to Achieve Net Zero
Achieving net-zero road transport emissions by 2050 is still possible but requires “much faster progress”, BNEF said. The report identifies heavy trucks as being “far behind the net-zero trajectory”, and the industry should be a “priority focus” for government policymakers. The economics of electric heavy trucks will improve rapidly throughout the 2020s and become as cheap as diesel equivalents even for long-haul applications. However, fuel costs will still matter and natural gas will remain economically competitive, the report said.
The study also identifies grid investments, grid connections, and permitting processes as areas that need to be streamlined to “support the large number of charging points needed for the transition”.