The global sales of electric vehicles (EVs) are exceeding expectations, leading to a decline in gas- and diesel-powered vehicle sales. However, the US government still predicts an increase in the demand for oil, causing the oil industry to continue expanding production plans.
According to the International Energy Agency (IEA), there is now a projection of a global peak in demand for oil, gas, and coal by 2030. This is a significant advancement compared to previous estimates that predicted the peak would occur in the 2030s. This change is attributed to shifts in energy policies, the rapid rise of clean technologies like EVs, and Europe’s transition away from fossil fuels.
The growing presence of EVs is crucial in reducing oil demand, as each vehicle that runs on electricity diminishes the need for gasoline and diesel fuel. Analysts predict that if countries continue to improve their electricity and charging infrastructure, EVs could dominate global car sales by 2030, potentially leading to a decline in oil demand.
Despite the positive trajectory of EVs and the indications of a peak in oil demand, major oil companies plan to increase production, and the US Energy Information Administration projects continued growth in global oil and fossil fuel demand. This discrepancy may be due to the longer lifespan and larger size of modern vehicles, which reduce efficiency gains.
The Biden administration, while offering tax incentives for EV purchases, has also supported the expansion of oil and natural gas exploration. Additionally, fossil fuel industries continue to receive government subsidies in many countries, which contradicts the goals of the Paris Agreement and risks stranded assets.
Industries often prioritize short-term gains over anticipating future developments that may impact their sectors. As renewable energy has gained traction, some electric utilities initially underestimated its potential and vied for the preservation of fossil fuel dominance. These conflicting interests may hinder necessary transitions to cleaner alternatives.
Overall, the accelerated growth of EVs and the potential decline in oil demand pose challenges for the oil industry. It is imperative for stakeholders to align their projections with sustainable energy goals to avoid costly stranded assets.
Sources:
– Fatih Birol, “Global energy demand could peak by 2030. But what happens if oil industry projections are wrong?”, The Conversation
– United Nations, “2023 Global Stocktake Report”, The Conversation