As EVs proliferate, oil demand is bound to plateau sooner or later. Don’t start planning Big Oil’s funeral yet, however – according to a new analysis from IHS Markit, short-term oil demand is still growing and will continue to do so through the end of 2020.
At present, the globe gobbles up around 100 million barrels of oily liquids per day, and demand growth has averaged 1.2 million barrels per day over the last five years. With economic growth robust and prices still low, Markit forecasts that this strong global demand growth will continue through 2020.
“Although EVs are making headlines, they are not yet a market force to replace internal combustion engines, so oil demand is currently growing strong,” said report co-author Spencer Welch. “Although EVs undoubtedly have the potential to disrupt the energy and automotive sectors in the longer term, they currently make up around 1.5 percent to 2 percent of total global vehicle sales, and account for less than 0.5 percent of the global vehicle fleet; so their influence on the oil market, in the short term, is limited.”
Looking forward, however, it’s a different story. “We expect a continued reduction in energy intensity to gradually offset the factors currently supporting demand growth,” said report co-author Eleanor Budds. “Several growth drivers, notably in EVs and fossil fuel regulation, have developed rapidly during the past year and will continue to do so during 2018 and 2019.”
“We expect oil demand growth to remain strong for the next couple of years, but looking further ahead, we expect growth to start easing back toward 1 million barrels per day per year, principally because of continually improving vehicle efficiency, progressively supported by increasing EV and hybrid vehicle sales,” Budds continued. “Vehicle efficiency improvements will be more influential on oil demand than fuel substitution during the next 10 years.”