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Aug. 12, 2021, 6:58 a.m. EDT

Peak Gasoline Demand Forecasts Aren't Scaring Big Oil

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Aug 12, 2021 (Baystreet.ca via COMTEX) -- Last week, President Joe Biden came out with an executive order aimed at making half of all new vehicles sold in 2030 electric (battery electric, fuel cell, and plug-in hybrid vehicles). The move is the latest in Biden's plan to fight climate change, in this case by targeting emissions from cars and trucks. Surprisingly, the three leading Detroit automakers General Motors /zigman2/quotes/205226835/composite GM -1.10% , Ford /zigman2/quotes/208911460/composite F -1.63% , and Chrysler parent Stellantis N.V. /zigman2/quotes/204248628/composite STLA -0.56% issued a joint statement supporting Biden's ambitious plan. The three have announced their shared aspiration to achieve sales of 40-50% of annual U.S. volumes of electric vehicles by 2030.

Biden has already called for $174 billion in government spending to boost EVs, including $100 billion in consumer incentives. A bipartisan Senate infrastructure bill includes $7.5 billion for EV charging stations. Consulting firm AlixPartners says investments in EVs could total $330 billion by 2025 with EVs likely to reach 24% of total sales by 2030.

But what do these developments actually mean for oil demand?

ICE Dominance

A report from IHS Markit shows that last year, light plug-in and fuel-cell vehicles, as well as electric city buses and two-wheelers, collectively displaced about 370,000 barrels per day of global oil consumption, a figure that is projected to grow to 1.5 million barrels per day by 2025, equal to about 1.4% of the projected level of total world oil demand. Certainly not enough to lose sleep over by long-term oil investors.

Electrifying America's vehicles is a critical part of combating climate change, considering that the transport sector accounts for 21% of total GHG emissions. But this is just not happening fast enough. According to Bloomberg New Energy Finance (BNEF), just 2.7 out of 100 vehicles sold last year were EVs, with EVs expected to account for just 8% of the global fleet by 2030. However, EVs could reach 31% of the global fleet by 2040, as per BNEF estimates.

As Dean Foreman, chief economist at the American Petroleum Institute, has quipped: "EVs can "eat into traditional market share for liquid fuels, but that's largely a developed economy, or rich country issue at this point."

Bloomberg New Energy Finance estimates that road fuel oil demand will peak in 2027, but it will take a decade later for the impact of advancements to be materially felt. Emissions will almost halve by 2050, but the sector will still be nowhere near net zero. In the best scenario, by the 2050s, fossil-derived road fuel demand will fall below levels last seen in the early 1970s. In this case, oil-related emissions will drop to 3.4 gigatons CO2 by 2050, down from almost 6.5Gt in 2019.

EV stocks retreat

/zigman2/quotes/205226835/composite
US : U.S.: NYSE
$ 57.77
-0.64 -1.10%
Volume: 11.08M
Oct. 22, 2021 4:00p
P/E Ratio
6.68
Dividend Yield
0.00%
Market Cap
$83.87 billion
Rev. per Employee
$790,226
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/zigman2/quotes/208911460/composite
US : U.S.: NYSE
$ 16.28
-0.27 -1.63%
Volume: 60.65M
Oct. 22, 2021 4:02p
P/E Ratio
18.79
Dividend Yield
0.00%
Market Cap
$65.03 billion
Rev. per Employee
$683,570
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/zigman2/quotes/204248628/composite
US : U.S.: NYSE
$ 19.56
-0.11 -0.56%
Volume: 2.83M
Oct. 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$61.47 billion
Rev. per Employee
$521,383
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