How much impact have electric vehicles had on global oil demand?
Every week we see more evidence that electric vehicles are accelerating into the mainstream. A recent report from BloombergNEF contains plenty of encouraging statistics. According to the latest Zero-Emission Vehicles Progress Dashboard, global passenger EV sales set new records in 2021, and some regions have reached mass-market levels of EV adoption.
Above: Tesla charging at a Supercharger (Flickr: Jakob Harter)
In Norway, the planet’s champion early adopter, plug-in vehicles (EVs and plug-in hybrids) took 97% of the auto market in the fourth quarter of 2021. Other European countries also reached impressively high market shares—60% in Sweden, 51% in the Netherlands, 49% in Denmark (the US lags far behind, at around 7%).
Tesla is no longer the only automaker selling substantial numbers of plug-in cars. At BMW, plug-ins represented 19% of sales in 2021. Geely reached 17%, Mercedes 14% and the VW Group over 12%.
Public charging infrastructure is being built out at a pace reminiscent of the turn-of-the-century roll-out of fiber-optic telecom networks. The US had 113,000 public chargers at the end of 2021—an increase of 26% for the year. Other countries are adding charging even more rapidly—India’s network grew by 79%, and Italy’s by 80%.
These stats, and the anecdotal evidence we see every day—more EVs on the roads, lots more EV ads on TV—are welcome bits of good news at a time when the other kind seems to dominate our news feeds. But how much impact is the growth of electrification having on the environment? Reducing air pollution and oil usage is EVs’ raison d’etre, so one could argue that the only stat that really matters is how much the world’s growing fleet of EVs is reducing demand for fossil fuels.
The good news is that EV drivers are indeed beginning to make a dent in global oil demand. According to Bloomberg, electric vehicles displaced almost 1.5 million barrels of oil per day in 2021—about 3.3% of total demand. This figure—avoided oil consumption—was around 725,000 barrels of oil per day in 2015, so it has more than doubled in the past six years.
Of course, even as electrification chips away at the demand for oil, other factors—such as population growth and economic expansion in the developing world—push in the other direction. Bloomberg tells us that global oil demand for road transport was around 44 million barrels per day in 2021. That represents only a slight increase since 2015, so as far as these stats go, the trend seems to be slowly shifting into the right direction.
There’s bad news too (did you think there wouldn’t be?). The shift to EVs has so far been almost exclusively a phenomenon of the rich world—and in fact, of the richest demographic segment of the richest countries. Affluent Norwegians and Dutch may find it easy to ditch their gas tanks, but for lower-income drivers in the US and other more unequal economies, going electric may not be viable. There simply aren’t enough lower-priced EVs on the market, nor are there convenient charging options for those who don’t own their own homes. Meanwhile, in developing countries, many of which suffer from horrendous traffic and choking air pollution, EVs barely exist.
Oil companies have long maintained that they expect rising car sales in the “third world” to more than cancel out any EV-related drop in oil demand in richer markets. Automakers may well share this vision—the US and Europe have long used their poorer neighbors as dumping grounds for older, more polluting vehicles, as any visitor to Central America, Cuba or Eastern Europe will notice. As the market for gas-burners dwindles in the North, carmakers can be expected to shift more production to the South, rather than allowing their factories to become stranded assets.
Another important takeaway from the Bloomberg report is that the EVs that are having the biggest effect on oil consumption are not the ones we tend to read about in the headlines. The vast majority of the oil demand avoided in 2021—a whopping 67%—was thanks to two- and three-wheeled EVs, which are being rapidly adopted in Asia. The next largest oil-saving segment was buses, which accounted for 16% of the total oil demand displaced. Passenger vehicles accounted for 13%, and commercial vehicles accounted for 4%.
So, there’s a glass-half-full scenario for you—our brothers and sisters in the developing world may not be able to afford Teslas, but they can afford electric motorcycles and tuk-tuks, and they are buying them. And the economics of electric buses are compelling everywhere in the world—Mexico City took delivery of its first battery-electric bus in 2020, and e-buses are rolling in Chile, Colombia and Ecuador. In an ironic twist, Moscow currently boasts the largest fleet of electric transit buses in Europe—over 1,000.
The oil barons’ Pollyannaish predictions of stable or rising oil demand may just prove to be—like the product of their products—a lot of hot air.