If electric car sales surge faster than expected, oil use could peak by the mid-2030s, OPEC said in a report on Tuesday (November 7).
But overall the cartel remains optimistic about oil demand in the next few decades, supported by use in emerging economies such as China and India. They are expected to be the two largest consumers through 2040.
“Driven by an expanding middle class, high-population growth rates and stronger economic growth potential, developing countries’ oil demand is expected to increase,” the organization said.
OPEC sees world oil consumption growing from 95.4 million barrels per day (bpd) in 2016 to 102.3 million bpd in 2022, which is an upward revision of almost 2.3 million bpd from its previous report.
But in the following decade, an acceleration in electric vehicle adoption could see oil demand plateau in the second half of the 2030s.
“In just a few years, [electric vehicles] have gone from being completely unaffordable, impractical and not particularly nice, to representing a valid option for a niche pool of customers,” OPEC said in the report.
According to OPEC, world oil demand is set to rise to 111.1 million bpd in 2040, but could be just 108.6 million bpd if electric vehicles are adopted more widely than assumed in the report’s reference case.
“It is highly unlikely that electric vehicles will penetrate the passenger car segment with this strength in less than 24 years,” the cartel says in its report.
The document also acknowledges that several countries have been pushing to roll out electric cars in the past year. In fact, France, the UK and even potentially China are among some of the countries that have outlined plans to ban all sales of fossil fuel cars by 2040.
OPEC added that although it expects a drop in oil’s share of the energy mix due to renewables growing at the fastest rate, oil will still remain the fuel with the largest share, at just under a third by 2040.
On Tuesday, December West Texas Intermediate crude fell 0.3 percent, to $57.20 a barrel on the New York Mercantile Exchange, while Brent crude for January delivery on London’s ICE Futures Exchange was down 0.9 percent, at $63.69 a barrel.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.