Electric Car Tipping Point Could Slash Oil Demand by 2025

The rise of electric vehicles and improvements in conventional vehicles’ fuel efficiency could reduce oil demand by 2025 by an amount almost equal to Iran’s entire production, according to a research note published earlier this month by Barclay’s Bank.

By 2040, if EVs can capture one-third of the world’s auto market “the drop in demand would be nearly as much as Saudi Arabia produces,” InsideClimate News reports.

“That kind of jaw-dropping outlook has become increasingly common in recent months, amid signs that a tipping point is coming for electric vehicles,” InsideClimate notes. “The technology breakthroughs, market forces, and government policies might also augur a peak in oil demand, and that would be a big step toward wiping out emissions of greenhouse gases from the automotive tailpipe.”

ICN chronicles the policy shifts across much of the world that are driving toward an EV revolution—from China’s landmark announcement that it would set a deadline to phase out internal combustion engines, to phaseout commitments in France and Britain over the summer, to Norway already hitting an EV sales threshold of about 40%. Many (though not all) major auto manufacturers are bowing to the trend, with GM promising 20 new all-electric models by 2030 and Global Products Chief Mark Reuss declaring that “General Motors believes in an all-electric future.”

Beyond the policy incentives that are helping EVs on their way, the key question is how soon the technology will be cost-competitive with legacy vehicles, InsideClimate notes. “Gregor Macdonald, editor of the Terrajoule industry newsletter, lays out his criteria for a ‘competitive’ electric vehicle: it must go 200 miles without recharging and be priced, without subsidies like tax credits, within $3,000 of a comparable gasoline model.” Macdonald expects some EV models to hit that target by 2020, the Carbon Tracker Initiative predicts a peak in world oil and coal demand that same year, Bloomberg New Energy Finance projects EVs triggering the next big oil price crash in 2022, and Stanford University futurist Tony Seba foresees internal combustion demand collapsing by 2025.

“Many oil companies say the peak is decades away,” InsideClimate notes. “They cite the International Energy Agency’s ‘current policies’ scenario, which finds slowing growth but no peak for oil beyond 2040—but assumes no changes in policy or technology. But some, including Shell, say it could come as soon as 2021, and are changing their business models accordingly.”

Late last month, the Energy Innovation think tank released an updated version of its Energy Policy Simulator that showed EVs capturing 65 to 75% of U.S. light duty vehicle sales by mid-century. In a post for The Energy Collective, the organization inventories the problems with conventional vehicles—inefficient energy conversion of only 17 to 21%, expensive fuels that require US$4 billion per year in government subsidies, climate-warming carbon dioxide emissions, and particulate pollution that kills 200,000 Americans per year.

Even so, today’s auto industry delivers a mature enough product that “it is not enough for a new technology to have the potential to be cheaper and better-performing than petroleum-powered vehicles,” Energy Innovation notes. “To compete effectively, electric vehicle technology must climb its own learning curve, driving down costs and improving performance, to the point where it is more attractive than petroleum-powered vehicles.”

But now, the think tank sees EVs “on track to achieve this break-out”, with three times greater conversion efficiency, fewer moving parts leading to lower maintenance costs, faster acceleration, and their storied status (depending on a jurisdiction’s electricity mix) of being a zero-emission option.

The post points to vehicle price and availability of charging stations as the two big barriers to EV uptake—but other coverage in the last couple of weeks suggests the solutions to both problems are near at hand.

On CBC, columnist Don Pittis suggests electric cars are due for the same kind of “inevitable price war” that brought personal computers into the mainstream.

Pittis draws his analogy from an interview with Syd Bolton, founder and curator of Canada’s Personal Computer Museum in Brantford, Ontario, who “describes startling parallels between the evolution of the PC and the electric car.” With both technologies, “he sees three phases—the invention stage, the standardization phase, and the shakeout phase—where high-cost manufacturers are weeded out.”

Bolton traces the early history of PC development, with Hyperion’s original “portable” computer giving way to Compaq’s lower-cost option, before Compaq was overtaken by Dell’s more affordable mail order business model.

“It seems almost inevitable one manufacturer will follow the Compaq strategy and transform the industry from high cost and low volume to low cost and high volume,” Pittis writes. “But this time around, the winner of a price war will not just eat the lunch of other electric car producers. It will also gobble a large share of the existing internal combustion market.”

For New York Times Wheels columnist Eric Taub, the need to recharge EVs in the midst of a longer trip (however occasional that need may actually be) means that “range anxiety” among potential buyers is giving way to “charging time trauma”. But the number of charging points is increasing, he notes, and better technology is beginning to speed up charging times.