Carbon Tracker’s New Tool Estimates Impact Of EVs On Oil Demand

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JUL 30 2018 BY EVANNEX 32

HOW MUCH (AND HOW SOON) WILL ELECTRIC VEHICLES AFFECT OIL DEMAND?

Sooner or later, the proliferation of electric vehicles (EVs) is going to cut into global demand for oil, but predictions about the timeline are all over the map.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Charles Morris. The opinions expressed in these articles are not necessarily our own at InsideEVs.

Above: A look at Carbon Tracker’s new interactive tool to help estimate the effect of EVs on oil demand (Source: Charged via Carbon Tracker)

Planners for the oil industry, as well as most auto industry execs (except for a certain California carmaker) tend to envision a gradual, decades-long process. At the other end of the scale, energy guru Tony Seba believes the Oil Age will be winding down by 2030.

A new report from Carbon Tracker examines many of the factors that affect how oil demand might be displaced by EVs, and includes an interactive software tool that allows users to experiment with three key variables to see how different future scenarios could play out.

Above: Carbon Tracker Data Scientist Laurence Watson explains Carbon Tracker’s new EV Oil Displacement Tool (Youtube: Carbon Tracker Initiative)

The report found that the size of the global EV fleet is the most significant variable affecting oil demand, although the annual mileage per EV and the improving efficiency of ICE vehicles are also important factors.

Carbon Tracker concludes that EVs could entirely offset annual growth in oil demand as early as 2027, and could bring about the much-anticipated (and much-feared) turning point of peak oil demand by the late 2020s.

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Written by: Charles Morris; This article originally appeared in Charged. Source: Carbon Tracker

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers, free of charge. Our thanks go out to EVANNEX. Check out the site here.

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32 Comments on "Carbon Tracker’s New Tool Estimates Impact Of EVs On Oil Demand"

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Very interesting!

It will be gradual only in the sense that vehicles are capital investments and it takes time to replace a fleet. It will happen sooner and faster than many people think.

I don’t think the oil industry will feel the impact so fast. Even if all personal transportation is 100% electric (still a long time off), there are commercial vehicles (buses and semis) and heavy machinery. Possibly the biggest factor is aviation – I don’t believe we will see all electric planes that soon. Jet fuel is a big chunk of the oil business.

Aviation uses about 2% of the fuel supply globally and GE is working on new engines that will get a 50% improvement in efficiency by 2025

Maybe you did not get the memo, but a 2 mbd drop in demand caused oil prices to crash. Sure they will still run planes and trains, and most trucks and semis, but the bottom drops out of the price of oil, and it won’t take 100% adoption to achieve that.

You forgot that China has added nearly 500,000 pure electric buses, and many trucks and heavy machinery (even ferries) are converting to electric as well. Semi fleets are on the cusp of going electric. Oil industry will feel the impact.

Commercial vehicles will do the switch sooner than private cars, not later. Since they generally get much higher mileage, the economics are more in favour of EVs; and they usually need replacement sooner.

Aviation will be more tricky; and possibly ocean fright as well. Both are smaller than land transport, though.

Of course oil usage won’t go away entirely, considering that a significant portion goes to non-fuel uses. But the impact will be very much felt.

The thing is that the global fleet is increasing so most displacement is just reducing the increase, not resulting in an absolut oil reduction. EVs will have a less impact on the oil business than most people think.

Once buses and semis are mostly electric, the impact on the oil industry will become more pronounced. It will be a very slow and gradual process.

I read an article about heavy trucks that said purchasing decisions are made purely on cost, not like cars. The article said if electric semis became even a tiny bit more economical than ice semis, the industry would change to electric overnight. Obviously I have no idea if or when that will happen.

The Tesla Semi represents a critical threat to the ICE semi fleets doing metro and medium over-land hauls. The 1200+ mile range hauls are still going to be untouched by buyers, unless, because of Obama-era driver regulations, the driver pattern changes. Whatever the case, if you’re young and you aren’t sure what your career is going to look like, getting a CDL and driving for a couple years while working correspondence courses for an advanced degree is an amazing way to avoid college debt. You slow the spend rate on the education and increase the earnings rate, you can avoid debt. This is obviously not an option for some fields of study that are hands-on, however there are several topics well-suited for this format. Education is important, especially in the USA, but even more important is knowing what you will do with it. If you’re not sure, the demand (and pay) is high in freight trucking in our country, and folks who have no issues with hauling alcohol or pork are in uniquely high demand because a high percentage of drivers today have religious objections to hauling such things as wine coolers and sausage pizza. I know a young man… Read more »

Too bad evil autonomy will wreck this great opportunity for young people in a not too distant future…

While it’s true that purchasing decisions for trucks are made purely on cost, for some reason fleet operators are often interested only in investments that have a return of about 1 1/2 years; sometimes less. (The research paper that pointed this out didn’t explain why this is the case, though…) That’s why a lot of readily available fuel saving measures do not take hold, unless forced by regulations.

Otherwise, no one would buy combustion trucks even today, where electric options are available…

From a “Carbon” perspecitve, I’m curious why the study doesn’t bundle fleet battery use, in buses and trucks? EVs may lag commercial/industrial oil displacement, as China seems to show. I like the variable adjuster tools, though, as they are exactly what forecasters need.

IMO, the purpose of chasing these numbers is to expose big oil’s wild optimism for ICE efficiency gains. Corner them into describing just what they plan to do, when those who believe 5,10, or more MBOE/d savings are achievable (by 2030-2040???). Then, apart from gains in kinetic recovery (hybrid), we can mostly declare the ICE stone has bled out. We can fully credit electrification as where innovation independently yields the most economic and environmental benefits.

Talked to a Chinese battery engineer for a major battery supplier this weekend and he expressed to me that many of the electric buses in china are bought and not used. Hence why the regulations where recently changed to make the rebates payable only after a certain amount of mileage has been achieved.

Soon EV growth will outpace global fleet growth.

Natural gas has a much bigger effect on oil prices than EVs. Similarly, OPEC production quotas and the conditions of various other petroleum exporting countries dwarf transportation concerns. Does anyone remember the Saudi play to intentionally hurt Iran’s economy by flooding the global market?

The Saudis failed at that market manipulation. I think their gal was to drive down US Shale Oil production profitability, however.

Any links on natural gas impact on oil prices would be helpful. Thanks!

1. Oil tends to drive NG prices, since both frequently come out of the same hole (it’s why they sometimes flare the NG).
2. Saudis don’t have the flexibility, they once did. OPEC is back to production control, since crying wolf at $40-50/barrel. At $70+, Putin is happy, and his BFF got a 4% GDP.

At $80+/barrel, the Canadian oil sands are back in expansion-extraction mode, and then OPEC production controls, become less pronounced. That is with the Canadian Power Outages, of course, being resolved by the end of the month.

https://www.google.com/amp/s/amp.businessinsider.com/an-outage-in-canada-is-raising-the-risk-of-a-global-oil-shortage-2018-6

It will also be harder to operate gas stations with the same prices and locations when you have fewer customers.

Not really… the big cost is the capital one of installing it (and the capital one to close it and sanitize the area). Keeping a gas station online costs very little. Some will of course close but today there are so many and very densely so having one instead of three within a kilometers radius will hardly be noticed.

Today not all stations are yet unmanned 24/7 stations, they will continue to convert into those.

It’s true that you need a pass through of customers to sell them junk, coffee, etc…Since gas stations make almost nothing on gas. It’s also true that there are about half as many gas stations today as there were 30 years ago.

Recycling plastic is needed plastic production gas increased 20x in the last 40 years. This is one of the products oil companies are hoping will continue growing when fuel for vehicles decrease. Time to demand 50% recycled content in plastic products.

Time to demand products not made out of plastic and the ones that are being made out of recycled and/or biofuels. Almost all plastic or uses for plastic can be made out of plant based materials.

As ice become more efficient, ha, ha that’s a good one.

Because, of course, it takes a whole lot of money to design and retool a factory to make those more efficient engines. It probably takes less money to convert to electric. The cost of operating electric vehicles is nearly half that of ICE as well – so I don’t expect further improvement of combustion engines.

Change happens slowly, then all at once. Consider, telegraph, horses for transportation, smartphones, pay phones, etc.

Remember that total demand today is about 100 mbd.
https://www.statista.com/statistics/271823/daily-global-crude-oil-demand-since-2006/
2 mbd over 10 or 20 yrs will be gradual and cause no shocks. 20 mbd on the otherhand is another story.

But Ugh – he should also include the amount of oil displaced by gasoline engines becoming more efficient. As it stands, he only counts EVs.

Bottom line is that EVs are not displacing oil in any significant quantities in the next 5 yrs.
Annual sales have to be in the double digit millions before a dent is made – roughly 10x of what we have today.
That day is coming, but it is not tomorrow.

More efficient ICE engine is part of the tool.
Haven’t you read it?

I think they might be underestimating indirect impacts of EVs. Such as in a desperate attempt to stay relevant, gasoline cars will most likely become hybrids as standard. Of course it the big picture it won’t slow down adoption of EVs, if anything accelerate it. But it will impact oil demand.

This is a great topic. There are many variables and questions related to reduction in gas demand.
Here are some I think about.

1. Will current refineries be able to process lower volumes of crude oil economically?
2. At what point will large highway gas stations no longer be financially feasible?

I’ve seen quite a few small local gas stations close shop in recent years.

NPNS! SBF!
Volt#671 + BoltEV + Model 3