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At the COP28 climate conference in Dubai, concerns are raised about the sluggish progress in reducing fossil fuel consumption to combat climate change. Despite this, a positive development highlighted by delegates is the increasing global presence of electric vehicles (EVs), which is significantly impacting demand.
Recent surges in EV sales have prompted industry experts to revise their projections for the peak of global oil use. Public subsidies and technological advancements have played a crucial role in overcoming the initial high costs of battery-powered cars. The International Energy Agency (IEA) anticipates a peak in world oil consumption at 103 million barrels per day by the end of this decade, adjusting from their 2017 forecast of nearly 105 million barrels per day by 2040.
Apostolos Petropoulos, an energy modeler at the IEA, attributes this shift to electrification policy support, significantly reducing oil demand in the transportation sector—a primary driver of global oil demand growth.
Major players like BP, as well as the governments of the United States and China, have adjusted their peak oil demand projections. Transportation accounts for approximately 60% of global oil demand, with the United States contributing around 10%. The IEA predicts that EVs will eliminate approximately 5 million barrels per day of world oil demand by 2030.
Currently representing about 13% of total vehicle sales globally, EVs are expected to reach 40%-45% market share by the end of the decade, driven by stringent efficiency standards and subsidies introduced since the 2015 Paris Agreement.
The U.S. Inflation Reduction Act’s $7,500 tax credit and similar measures aim to offset high EV sticker prices. However, the IEA suggests that EV sales must reach around 70% of the market by 2030 to align with the Paris Agreement’s warming limitation goal.
While challenges such as delayed production plans and rising costs affect the short-term outlook, falling EV battery costs provide optimism for the long term. The future adoption of EVs will heavily rely on pricing and charging station availability, where China holds an advantage.
In China, massive government subsidies and the abundant supply of crucial rare earths contribute to the lower cost of EVs compared to gasoline-powered cars. With approximately a quarter of the market share, China is expected to lead global EV growth.
In contrast, the United States faces higher average EV prices, exceeding $53,000, and a significant lag in public charging station numbers. Despite these challenges, the IEA predicts that EVs could constitute up to 50% of new U.S. car registrations by 2030, driven by improving technology, falling prices, and the appeal of avoiding volatile gas prices.
While concerns about potential political influences linger, the ongoing transition to EVs appears inevitable, according to the IEA’s Petropoulos.