August 25, 2022 | Automotives Blogs
The rising popularity of electric vehicles (EV) is not only reducing the consumption of diesel and gasoline in the transportation sector but also impacting oil and gas exploration and production activities.
The sales of EVs increased exponentially throughout 2021 and are projected to experience the same trajectory in 2022, according to the International Energy Agency (IEA).
Around 2 million EVs were sold in Q1 2022 -- an increase of 75% compared to Q1 2021.
The transportation sector is a major consumer of petroleum products such as diesel and gasoline and accounts for nearly 60% of the global demand. In the United States, around 67% of petroleum products are consumed by the transportation sector. In 2021, consumption of gasoline stood at 8.8 million b/d, which was about 44% of the total U.S. petroleum consumption.
The growing popularity of EVs is expected to diminish the global oil demand in the near future.
According to IEA data, around 16.5 million electric cars were sold in 2021 globally, an increase of 43.5% from 2018.
China is the largest market for EVs and accounted for 7.5 million sales followed by Europe with 5.5 million sales, while the U.S. accounted for 2.5 million sales during the same period.
Norwegian petroleum refiner Equinor ASA predicts a destructive drop of 47% in oil demand in the global market between 2018 and 2050.
The shift toward sustainability is also a key driver for increased sales of EVs across the globe. This market phenomenon is also likely to result in energy transition in the near future. However, 76% of surveyed O&G executives suggest that a rise in oil prices above $60 /bbl is also projected to accelerate energy transition.
As a result, leading economies have set ambitious targets for electric vehicles. For instance, the U.S. government looks to increase the share of electric vehicles in new car sales to 50% by the end of 2030 . This can lead to a drop of around 34% in crude oil demand over the same period.
Additionally, according to IHS market research, the demand for oil and liquids is expected to drop by around 25% from 20.3 mmbbl/day in 2019 to 15.3 mmbbl/day in 2050. Testimates that U.S. oil demand for transportation could drop to 7 mmbbl/day by 2050.
The growing popularity of EVs among vehicle buyers is projected to limit the sales of internal combustion engine-based vehicles in the global market, this will directly hamper the demand for oil & gas products.
According to China Passenger Car Association (CPCA), vehicle production at the Tesla Giga Shanghai plant exceeded 322,000 units (up 66% year-over-year) during the first seven months of 2022.
Additionally, U.S. carmaker Ford expects 40% of its global sales to be captured by battery-electric vehicles by 2030.
In 2021, nearly 10% of all new cars sold globally were EVs. Norway is likely to be an emerging market for EV with new sales of EVs over 60%, which is comparatively higher than the US, China, and other countries in 2021.
According to an IEA report, customers now have multiple options to choose from, with more than 450 different EV models by the end of 2021, around five times more than 2015. Additionally, some EV manufacturers are looking forward to adding some new models in their portfolio. For instance, GM plans to add 30 new models to its product portfolio by 2025.
Also Read: Minimize EV Supply Chain Issues
Despite significant obstacles, oil and gas companies are most likely to keep evolving. The penetration of EVs is comparatively less due to higher cost and the need for huge expenditure to build EV infrastructure including charging facilities and service stations.
Nonetheless, the oil & gas market is more likely to experience a declining demand trend from transportation over the next decade.