Lithium Economics

Is the electric car threat to oil wildly overstated?

Mar 06, 2017

It has recently been argued that EVs are a myth and that there is no such thing as a threat of them to oil. In this blog I severely question these views and calls for a more responsible work on the part of the International Energy Agency (IEA) in charge of oil statistics in the world.

In a recent article published on The Oil Price, it has been argued that EVs are a myth and that the electric car threat to oil is wildly overstated. This brief note is aimed at questioning this view.

As I've shown in a previous article, published on Seeking Alpha, EVs are likely to reduce the demand for oil by 2.2 mbd by 2024. However, this trend, which has been further validated in my latest piece, also published on that web site, is not picked up by the Liquids Demand chart in The Oil Price article where it is shown that the demand for oil used by light cars and the demand for oil used by trucks (where I presume buses are included) continue growing albeit slowly by 2024. This is at odds with any reasonable thinking.

In a comment on a recent article on EVs published by The hEconomist, I have advanced the following explanation: "Actually, according to 2016 IEA's Oil Medium Term Market Report (OMTMR), the demand for oil is expected to increase until 2020 by 1.2 million barrels/day (average) each year and this estimation can be extended to 2024. True, if we add up all these increases from 2015 to 2024, we end up with 11 mbd, offset by 2.2 mbd reduction, due to EVs, and a net increase in demand of 8.8 mbd.

However, these numbers are part of a story IEA and ‘Big Oil’ have been telling us since many years ago that boils down to a situation of "business as usual".

I have reviewed the demand figures in the last 5 OMTMRs and found the same kind of "inertial" growth in the demand for oil. But the fact of the matter is that much has changed in the world since EVs began to ramp up in 2015. And here we need to take a close look at China, where the negative correlation between adoption of EVs and "renewables" and the demand for oil has become more and more apparent in recent times. The question is when these events will start to be accounted for by IEA's statistics.”

Hence so long as IEA doesn’t start to consider the impact of EV sales on the demand for oil we will have to witness publication of misleading articles such as the one we have reviewed today.

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