All signs point to oil’s growth, but there may be detours along the way
OPEC and the International Energy Agency agree that there's nothing to fear from the electric car—yet
The International Energy Agency and the Organization of the Petroleum Exporting Countries rarely agree on much. But recently they’ve found middle ground on these two points: Oil demand will not peak in the near future and the electric car will not be the downfall of the fossil fuel business.
“Oil demand growth is not coming from cars—it’s from trucks, aviation and the petrochemical industry and we don’t have major alternatives to oil products there,” said IEA executive director Fatih Birol at a November energy conference in Paris. “I don’t buy the argument that electric cars alone will cause a peak in oil demand at least in the short and medium term.”
The IEA chief’s statement came just days after OPEC released its global oil market report which predicted that peak oil demand could be reached by 2029 if the provisions of the recently ratified Paris climate deal are put into full force by all signatory nations. That was OPEC’s secondary scenario outlined in its 25-year forecast. The primary scenario still saw countries pursue the emissions curbs of the Paris agreement, but less aggressively, particularly among those poorer nations whose participation is dependent on outside financial support. That outlook sees oil demand rising until at least 2040, when the forecast ends.
Of course, the Paris agreement is non-binding, and the first round of pledges required nothing more than a signature to fulfill its contributions. As time goes on, however, any country adhering to the strict letter of the agreement will have to ramp up its cuts on emissions every five years or so. The idea that all of the successive governments of signatory nations will be willing or able to achieve this between now and when global emissions are eventually cut is almost unthinkable.
In the meantime, the IEA predicts global oil demand will rise by 1.2 million barrels per day in 2017 over 2016 levels. OPEC expects transport expansion in the developing world to double the number of passenger cars on roads worldwide from 1 billion to 2.1 billion in 2040.
While sales of hybrid, electric and hydrogen-powered cars are certainly growing, they remain a small, single-digit percentage of global sales. OPEC and many other analysts predict they will make up for less than a quarter of the global passenger vehicle fleet by 2040. With total passenger vehicle sales expected to double during that time, and no suitable replacement for oil for aviation, shipping and manufacturing emerging, global oil demand has nothing to fear from the electric car—yet.