BP Report sees drop off for oil by 2040

What’s good news for drivers may be bad news for oil companies around the world. The progress of electric vehicles could be a cause for worry over the next 20 years.

A drop in oil consumption is to be expected with the advent of electric vehicles. As the demand for EVs goes up, oil consumption will go down. Oil company BP has released its annual Energy Outlook report that looks at just what the 100-fold growth in electric vehicles could mean for oil demand by 2040.

The number of electric vehicles is expected to go up from three million today to over 320 million by 2040, representing around 15 per cent of all vehicles on the road in the next 20-plus years.

Even though travel demand is increasing and economies are growing – factors that would bode well for oil demand – BP’s Evolving Transition scenario shows that government policies, technology and social preferences will continue to evolve in favour of new vehicle technologies. Electric vehicles will be designed with better technology to make them even more efficient, lowering the demand for internal combustion engine vehicles. It is predicted that around 30 per cent of kilometers driven will be powered by electric vehicles by 2040 compared to relatively nothing in the year 2016. Shared rides are also becoming more and more popular, adding to the reduction of the number of vehicles on the road.

These factors alone could cancel out any potential higher demands for oil, according to BP. Further, electric vehicles also cost less to maintain compared to regular gas-run vehicles, and as such are assumed to be driven two-and-a-half times more, according to the report.

This chart shows the increase in the types of electric vehicles from 2000-2017 and what it is predicted to be at from 2020-2040.

Another issue for oil companies are autonomous vehicles. Their initial high costs mean that the majority of cars will be bought by companies offering shared mobility services, which would likely be using electric vehicles.

“What we expect to see in the 2030s is a huge growth in shared mobility autonomous cars … Once you don’t have to pay for a driver, the cost of taking one of those share mobility fleets services will fall by about 40 or 50 percent,” said Spencer Dale, group chief economist at BP.

This chart shows the percentage of different types of autonomous cars and their kilometre usage likely to be driven from 2020-2040.

As more EVs are sold, technicians will have less of a reason to invest in the training of traditional vehicles. Since their focus will be on being able to fix EVs, customers will likely invest in the technology, pushing down demand for liquid fuel.

“New cars in 2040 are likely to be around 70 per cent more efficient than in 2000. A typical new ICE passenger car in the EU by 2040 consumes around three liters of gas per 100 km, compared with five liters today and around 7 liters in 2000,” as stated in the report.

The report also suggests, “Natural gas, electricity and a mix of ‘other’ types of fuels are each projected to only account for around 5 per cent of transport fuel by 2040.”

This chart shows the predicted amount of km driven using various fuel types from 2020-2040.

Some better news for oil companies is that even though energy used in transport is estimated to increase by only 25 per cent over the next 20-plus years, compared to the 80 per cent in the previous 25 years, transport energy consumption is still predicted to continue to be dominated by oil.

Larger transport vehicles are not at the point to be made into autonomous or electric vehicles because growth in natural gas is concentrated in long-distance road haulage and marine transportation. As a result, electricity usage increases more in passenger cars and light trucks. Also, growth in fuel demand for trucking is stronger than in smaller vehicles because of more freight activity and less efficiency gains, according to BP.

This chart shows the type of fuel that large transports consumed the most of from 2000-2017 and what it is predicted to consume until 2040.

Overall, transport energy consumption will not be able to stop the oil companies from taking a hit. As technology becomes smarter and more effective, it lessens the need for oil in the future.