The International Energy Agency (IEA) has announced that global oil demand will reach its peak of 105.7 million barrels per day (mb/d) in 2028, during an existing decline initiated by the advance of electric vehicles (EVs).
“The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade as electric vehicles, energy efficiency and other technologies advance,” said IEA executive director Fatih Birol. “Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition.”
Oil Demand For Transport Fuels Is Predicted To Peak Sooner Rather Than Later
Road transport fuels, which have historically driven oil demand, will face significant challenges in surpassing pre-COVID-19 levels. The combination of energy efficiency improvements and substitution factors will exert a heavy burden on their growth prospects, according to IEA estimates.
Specifically, the demand for oil in transport fuels is expected to enter a declining phase after 2026. This shift will be driven by the widespread adoption of EVs, the increasing use of biofuels, and the continuous enhancement of reducing fuel consumption by local regulation.
The projected decline in oil demand, which is expected to be largely offset by vehicle electrification, will mostly affect gasoline. In fact, gasoline demand could peak as early as 2023, with a 900 kb/d drop from 2019 levels by 2028.
Table: Global oil demand by product (mb/d), 2019-2028
|Year||2019||2020||2021||2022||2023||2024||2025||2026||2027||2028||2022-28 Growth Rate||2022-28 Growth (mb/d)|
|Residual fuel oil||6.2||5.6||6.2||6.5||6.7||6.7||6.7||6.7||6.7||6.7||0.4%||0.2|
EV Sales Skyrocket, Putting A Dent On Fuel Demand
According to the most recent IEA facts, the global EV industry is expanding rapidly. As of early 2023, there were around 28 million EVs on the road worldwide, a figure that is predicted to be surpassed by new sales in 2023-’24. An astonishing 155 million EVs are expected to be sold by the end of 2028, resulting in significant displacement of gasoline and diesel consumption of 2.3 mb/d and 630 kb/d, respectively.
The release of new models of EVs and the establishment of national policies promoting EVs will support sales in the coming year.
Stricter emission requirements and purchase subsidies led to a substantial increase in EV sales in Europe, which hit 2.7 million in 2022. Furthermore, the recently established EU standards aim for all new vehicles and vans to be zero-emissions by 2035, which is also accelerating the region’s EV sales momentum.
The EV industry in the U.S. is also expected to benefit significantly from high tax credits of $7,500 per vehicle offered by the U.S. Inflation Reduction Act (IRA). This advantageous legislation is likely to boost sales, with forecasts of 4.8 million EVs by 2028 as the Biden Administration set an aggressive goal of having zero-emission vehicles account for half of new vehicle sales by 2030.
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