EVs Will Have No Effect on Oil Demand

It seems reasonable that oil demand will fall as the number of electric vehicles (EV) increases. Unfortunately, there is no support for that popular belief. In fact, the data suggests that EVs will have close to zero effect on oil demand even in the longer term.

Estimates for the amount of oil demand already affected by EVs range from about 0.4 to 1.5 million barrels per day (mmb/d). The 1 mmb/d range of those estimates tells you something about their credibility.

“A combination of EVs, fuel efficiency and shared mobility is knocking down demand for road fuels…Oil consumption displaced by EVs rises to over 20 million barrels per day by 2040.”

Bloomberg NEF

How can the experts be wrong? Let’s look at the data and see.

The first problem is that EVs represent a tiny fraction of the global vehicle fleet. Optimistic pronouncements about EV growth generally refer to new vehicle sales only. If the expectation is a reduction in emissions, we must look at the total number of vehicles in the world.

Figure 1 shows that there were about 28 million EVs plus hybrids in the world in 2022. That’s only 2% of a world vehicle fleet of about 1.4 billion cars, trucks and vans.

Looking forward, the U.S. Energy Information Administration (EIA) expects EVs to increase to about 25% of world light vehicles by 2050 (Figure 2). That’s a huge change from just 2% so I wanted to find some country in the world in which EV use was already about 25%.

Around 23% of vehicles in Norway were EVs and hybrids in 2022. Despite the extraordinary growth in these vehicles from only about 3,000 in 2008 to 980,000 in 2022, fossil fuel consumption hasn’t changed much (Figure 3). Average consumption per vehicle in 2021 and 2022 was about 303,000 gigawatts—the same as the average for the 10 years before 2020.

One could make the counterfactual argument that consumption would have been even higher in recent years without electric vehicles in Norway. That may be true but it’s not a very compelling reason to switch to EVs.

The U.S. total vehicle fleet was about 228 million in 2022 or 16% of the global total of 1.4 billion cars, trucks and vans. Figure 4 shows that U.S. per-vehicle liquids consumption was about 3% lower in the two years after 2020 than in the two years before 2020.

Some might point to that as evidence that electric vehicles are making a difference in oil demand. Unfortunately, the decrease in consumption perfectly matches the 3% decrease in total vehicles in the U.S. fleet.

Moreover, the decrease in U.S. vehicle miles traveled before and after 2020 was also about 3% (Figure 5). Americans are driving less and that’s a good thing for emissions but it has nothing to do with EVs.

There are other reasons to doubt that replacing conventional vehicles with EVs will lead to less oil consumption. For one, the idea of oil displacement promoted by the International Energy Agency reflects a fundamental ignorance of the refining process.

There is a sequence of products made in a refinery. It’s not an a la carte menu in which you can order diesel, kerosene and jet fuel but tell the waiter to hold the gasoline. Gasoline is produced first. Even if EVs led to less gasoline demand, it would still have to be produced to get the other products. The only way to reduce oil demand is to use less oil, not some distilled fraction of oil.

Electric cars are marketing magic. You can continue driving as much as you want and help to save the planet at the same time. This fits perfectly with the mistaken belief that a transition away from oil will be relatively easy and painless.

If you like EVs, you should buy one but the data don’t support that driving one will do anything to save the planet.