The world is witnessing a rapid shift to electric vehicles (EVs) that is reducing the consumption of oil and gas and helping to fight climate change. EVs are becoming more affordable, efficient, and popular, thanks to government policies, technological innovations, and consumer preferences.
EVs are changing the oil demand outlook
According to the International Energy Agency (IEA), a group of 29 industrialized nations, global oil demand will peak at 103 million barrels per day by the end of this decade, down from its previous forecast of 105 million bpd in 2040. The main reason for this downward revision is the growing adoption of EVs, which will displace some 5 million bpd of oil demand by 2030.
Transportation accounts for about 60% of world oil demand, with the United States alone consuming around 10%. EVs are expected to capture up to 50% of new car registrations in the U.S. by 2030, and between 40%-45% of the global market, according to the IEA.
This trend is driven by a combination of factors, such as stricter efficiency standards, generous subsidies, improved battery performance, lower costs, and greater consumer awareness. The U.S. Inflation Reduction Act, passed last year, offers a $7,500 tax credit for buying a new EV, which helps to offset the higher sticker prices compared to gasoline-powered cars.
China leads the way in EV adoption
China is the world’s largest EV market and the leader in EV production and innovation. The average EV in China costs 31,165 euros ($33,964), which is 8% cheaper than the average gasoline-powered car, thanks to massive government subsidies and easy access to rare earths that are essential for EV manufacturing.
Based on a report by Reuters, China has about a quarter of the global EV market share and is expected to maintain its growth momentum. China also has the most extensive network of public charging stations, with about 1.2 million, compared to 400,000 in Europe and 52,000 in the U.S.
The availability and affordability of charging infrastructure is a key factor for EV adoption, as it reduces the range anxiety and inconvenience that some consumers may face.
EVs are not enough to meet the Paris Agreement goals
While the rise of EVs is a positive sign for the global energy transition and the fight against climate change, it is not enough to meet the goals of the Paris Agreement, which aims to limit the global temperature rise to 1.5 degrees Celsius above pre-industrial levels.
The IEA estimates that EVs would need to account for 70% of the global car market by 2030 to achieve this target, which is far beyond the current projections. EVs also face some challenges, such as supply chain disruptions, labor costs, interest rates, political uncertainties, and consumer preferences.
However, EVs are not the only solution for reducing greenhouse gas emissions from transportation. Other options include improving public transit, promoting car-sharing, switching to biofuels, hydrogen, or synthetic fuels, and enhancing vehicle efficiency.
The COP28 climate conference in Dubai is an opportunity for the world leaders, policymakers, businesses, and civil society to discuss and implement these solutions and accelerate the transition to a low-carbon economy.
