IEA sees electric car boom displacing up to 12 million b/d of oil by 2035

The International Energy Agency raised April 23 its estimates for global oil demand displacement from booming sales of electric vehicles citing growing policy impetus in key markets.

New emissions standards adopted in the US, EU, and Canada over the past year mean oil demand displacement from electric vehicles (EVs) will amount to 6 million b/d by 2030 and 11 million b/d by 2035 based on current policies, the IEA said in its latest annual Global Electric Vehicle Outlook.

If countries fully meet all their announced energy and climate pledges, the amount of oil displaced by electric vehicles will rise up to 12 million b/d, the IEA said citing its more optimistic Announced Pledges Scenario (APS).

In its previous outlook for EVs published in April 2023, the IEA estimated more than 5 million b/d of oil demand would be displaced globally by 2030 under its base-case scenario.

"The continued momentum behind electric cars is clear in our data, although it is stronger in some markets than others," said IEA Executive Director Fatih Birol. "Rather than tapering off, the global EV revolution appears to be gearing up for a new phase of growth."

Supported by incentives and falling battery costs, EV sales are growing fast from a low base globally and the IEA reiterated it expects oil demand from road transport to peak around 2025 as a result. Oil demand displacement of 6 million b/d by 2030 represents a sixfold increase on 2023 levels and up from about 700,000 b/d in 2022.

With EV sales continuing to surge, global electricity demand to recharge them could reach nearly 2,200 TWh in the base-case scenario, the IEA said. In the APS scenarios, demand could be higher, standing at about 2,700 TWh in 2035, or over 20% more than in the base case. In 2023, the global EV fleet consumed about 130 TWh of electricity. By 2035, EV electricity demand accounts for less than 10% of global final electricity consumption, the IEA estimates.

Sales growth

Sales of electric cars, vans, trucks, buses, and two- and three-wheelers are expected to hit 17 million globally in 2024, the IEA estimates, up from almost 14 million in 2023, led by strong growth in China, the US, and the EU.

The IEA estimates that, under current policy settings, half of all cars sold globally by 2035 is set to be electric, a figure that would rise to 66% if countries meet all their announced energy and climate pledges.

In the first quarter of 2024 alone, global electric car sales grew by around 25% compared with the first quarter of 2023, similar to the year-on-year growth seen in the same period in 2022, the IEA said. China retains its position as the largest market for electric cars (60%) and sales there are projected to leap to about 10 million, accounting for about 45% of all car sales in the country this year, the IEA said.

"Electric cars continue to make progress towards becoming a mass-market product in a larger number of countries. Tight margins, volatile battery metal prices, high inflation, and the phase-out of purchase incentives in some countries have sparked concerns about the industry's pace of growth, but global sales data remain strong," the IEA said in the report.

In Europe for example, EVs consolidated their market position as the second-most-popular choice for buyers last year as the share of diesel and gasoline-powered vehicle sales continued to shrink below 50% of the market, according to the European Automobile Manufacturers Association, or ACEA.

Road transport is responsible for more than half of global oil demand of around 103 million b/d. By 2030, S&P Global analysts expect the global fleet of passenger battery and plug-in, hybrid cars to displace some 3.3 million b/d of gasoline and diesel fuel, up from around 385,000 b/d in 2022.