EVs Could Eliminate Millions of Barrels of Oil Demand by 2030

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Over the short-term, most market analysts are expecting something of a supply-side crunch in the second quarter, but by the end of the decade, oil demand could be limited by advances in the electric vehicle market, an analytics and marketing expert found.

Saudi Arabia's pledge to go it alone by trimming some 1 million barrels of oil per day (BBL/d) from its production slate come July lent to lingering concerns of an undersupplied market during the second half of the year.

For demand, the total amount of refined petroleum products sent to the market over the four-week period to June 16 was up 0.8% from the same period last year. For just motor gasoline, the total sent to the market, a key proxy for implied demand, is still about a half million BBL/d below pre-pandemic levels, however.

At least some of that sluggish demand can be attributed to progress made in fuel efficiency and the introduction of more electric vehicles (EV) in the U.S. market.

"We see about 60% of total EV car sales will be in EVs across Chinese, European and U.S. markets," said Michael Bergen, executive vice president of analytics and marketing at Industrial Info Resources. "Of that, we expect around 1.6 million in total EV sales in the U.S. market this year."

Bergen said new entries into the EV game, such as Rivian (Irvine, California) and Polestar (Gothenburg, Sweden), along with new models like the F-150 Lightning from Ford Motor Company (NYSE:F) (Dearborn, Michigan) are creating more competition, which is good for consumers.

Meanwhile, major automotive companies are adopting their manufacturing strategies to use Tesla's charging stations, easing some of the range and access concerns for consumers. Elsewhere, as part of a so-called reshoring effort, incentives are abundant -- to the tune of $12 billion in commercial and personal vehicles -- in the Inflation Reduction Act, provided there's a strong domestic manufacturing base.

To that end, and like major energy companies such as Chevron Corporation (NYSE:CVX) (San Ramon, California) that are investing in the alternatives necessary to proceed along the energy transition pathway, automakers are looking to a cleaner future.

General Motors Company (NYSE:GM) (Detroit, Michigan) in January announced plans to invest heavily in four plants to build the next generation of its block V-8 engine as well as EV production across its various assembly lines.

Of that, Ohio received $55 million in investments, including $8 million for EV, while a facility in New York will receive $56 million for battery pack cooling lines for EV production.

The Great Lakes states, meanwhile, are a hot market for EV production in North America. At just two plants alone, Bergen said he sees more than $5 billion in spending coming down the pipeline.

"General Motors could be investing some $4 billion to expand its battery pack assembly line in Lake Orion, Michigan, while Ford has around $1.5 billion set aside for a similar expansion at its Avon Lake assembly plant in Ohio," he said.

Headwinds remain, however. The U.S. market is far behind peer economies such as Europe and China when it comes to infrastructure and market share. With everyone sharing Tesla's charging network, meanwhile, congestion at "the pump" may offset some of the gains from availability.

Elsewhere, it could be years before EVs reach cost-parity with vehicles powered by the internal combustion engine. The Ford F-150 XL has a suggested base price of $33,695, while it would cost $59,974 to place an order for the electric Lightning version, for example.

Nevertheless, EVs are taking up a greater share of the road. While so-called peak oil demand may be something of an elusive concept, Bergen said the decline in appetite will eventually show up in the data.

"We see total crude oil demand declining by 5 million BBL/d by 2030 through the widespread adoption of EVs," he said.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).