Note: Today’s post is part of our “Editor’s Choice” series where we highlight recent posts published by our sponsors that provide supply chain insights and advice. This article is from GEP and look at the impact of EV boom on the oil & gas market.
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 percent compared to Q1 2021.
The transportation sector is a major consumer of petroleum products such as diesel and gasoline and accounts for nearly 60 percent of the global demand. In the United States, around 67 percent 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 percent of the total U.S. petroleum consumption.
Impact of EVs on Oil & Gas Market
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 percent 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 percent 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 percent 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 percent by the end of 2030. This can lead to a drop of around 34 percent in crude oil demand over the same period.
The EV Wave
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 percent 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.
To read the full article, click HERE.