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Global vehicle sales drop in coming years, oil demand rises: IHS Markit

oil demand

Global oil demand is expected to rise even as ride-sharing companies like Uber and Lyft change the automotive market, according to IHS Markit.  

Oil demand for non-transportation uses expected to rise

A study by IHS Markit released on Tuesday says even though global vehicle sales are forecast to decline over the next twenty years, oil demand will rise to 115 million barrels per day (b/d) by 2040.

IHS Markit says vehicle demand worldwide will decline as consumers use ride-hailing services like Uber, but it adds that by 2040, vehicle miles traveled will grow to about 11 billion miles per year, up 65 per cent over 2017.

“A great ‘automotive paradox’—where more travel via car than ever, but fewer cars will be needed by individuals—will be a defining quality of the new automotive future,” said Daniel Yergin, IHS Markit vice chairman.

IHS Markit predicts that by 2040, changes in transportation will be visible on roads and highways around the world, and will have significant implications for industry, public transit systems and individuals.

“We could very well be on the cusp of the greatest transformation in personal transportation since the dawn of the automotive age,” added Jim Burkhard, vice president, global energy markets and mobility.

Oil will continue to play a major role as a fuel for transportation, however, its monopoly will fade.  By 2040, ICE cars will still account for 62 per cent of new car sales in 2040 in China, Europe, India and the US.  That is down from 98 per cent in 2016.

ICE vehicles sales in 2040 will remain strong, buoyed by sales of mild to full hybrids, which still primarily rely on internal combustion engines.  The study predicts sales of new cars powered solely by gasoline or diesel will fall below 50 per cent by 2031.

During the 2020’s higher fuel economy, more stringent emissions standards and the drop in ICE’s share of new vehicle sales will lead to a drop in aggregate gasoline demand.  But, overall oil demand will rise.

“Oil’s monopoly as a transport fuel will erode as a new era of multidimensional competition takes hold—but it will remain a major player,” Burkhard said. “Many of its advantages as a fuel, such as its high energy density, will persist.”

And, by 2040, a forecast drop in battery pack costs will boost sales of electric vehicles to 30 per cent of new car sales in key automotive markets, up from just 1 per cent in 2016.

EV tax credit

Dropping the EV tax credit would likely impact sales of electric vehicles. Tesla photo.

Greater demand for EVs will also nudge up electricity demand in the US and Europe by 2040.

As well, IHS Markit calls for sales of autonomous vehicles to hit a significant share of new vehicle sales by 2030.

“It’s not only a matter of technology,” said Yergin. “Political, regulatory, social and psychological barriers to adoption will also need to be overcome.”

Companies like Uber and Lyft are expected to be among the key adopters of electric and driverless cars.  The study predicts the companies will operate their own fleets, as opposed to the current set up where drivers provide their own vehicles.

The shift to company fleets will come about due to cheaper costs of electricity over gasoline, easier maintenance and the ability to utilize centralized charging depots and networks for fleet-based transportation.

IHS Markit says that though the shift from ICE’s to EV’s will indeed be a transformative period for the automobile, the sheer scale of the current automotive ecosystem will serve as a moderating influence on the pace of change.

Tom De Vleesschauwer, head of IHS Markit’s  Transport and Mobility Practice within the Automotive Group says “our analysis shows that there will be much that looks familiar, even in 2040. The majority of new cars sold and miles traveled will be in vehicles purchased for personal use. And a large share of those will have internal combustion engines that run on refined crude products. But the future of automotive transport will be an era defined by multidimensional competition. And the changes that future brings about will be profound and permanent.”

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