EVs: Decreasing Oil Demand and Building Infrastructure

The electrification of transportation is revolutionizing the global demand for oil. Electric vehicles (EVs) are replacing traditional combustion engines, resulting in significant oil savings.
EVs eliminate the need for oil in various vehicle types. A standard combustion engine passenger car in the US consumes 11 barrels of oil equivalent (BOE) annually, while a motorcycle uses 1 BOE, a Class 8 truck requires 24 BOEs, and a bus consumes over 258 BOEs. By transitioning to EVs, this oil demand is displaced by electricity.

Two and three-wheeled vehicles, predominantly popular in Asia, have saved the most oil since 2015. In that year, they displaced nearly 675,000 barrels per day, growing to 1 million barrels daily by 2021. While commercial electric trucks are still limited, they are expected to increase significantly by 2025. Electric passenger vehicles have experienced substantial growth since 2015.

The electric car market witnessed remarkable expansion in 2022, with sales surpassing 10 million units. This growth is expected to continue, leading to estimated daily savings of 886,700 barrels of oil by 2025.

Shifting to electricity doesn’t guarantee a drop in oil prices. The decline in oil demand may lead to price volatility if supply investments decrease faster than demand. However, this transition presents an opportunity to meet electricity demand sustainably using clean energy sources like wind, solar, and nuclear power.

The transition requires expanding infrastructure to support EVs. This includes the development of charging stations, increased transmission capacity, and battery storage. Robust infrastructure is vital for a successful and widespread shift from gasoline to electric vehicles.

As EVs gain prominence, the impact on oil consumption is significant. The adoption of electric vehicles across different segments reduces the demand for oil. However, sustainability considerations and infrastructure development are crucial for a successful transition. Embracing renewable energy and expanding charging networks will drive us toward a cleaner and more sustainable transportation future.

Source: Visualcapitalist, BloombergNEF
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