Forecasters guarded about EV share of VMT

By Michael Brenneis

A smooth and equitable transition to a low-carbon global economy is an essential component in the mitigation of anthropogenic climate change. But migration away from a long-entrenched fossil energy system has its challenges. Adequate and consistent carbon emission reduction policy plays an important role. In the passenger vehicle sector, how will this process be affected by oil demand and EV adoption trends?

A new report by Marianne Kah, from the Columbia University Center on Global Energy Policy, examines a number of EV penetration forecasts and summarizes the 2019 trends and their changes since 2018. The report focuses on passenger vehicles, which account for about 23 percent of oil demand. While other segments of the transportation sector—trucks, and aviation and shipping—account for about 29 percent of the oil demand, electrifying cars may be easier, according to the author.

The International Energy Agency forecasts little growth in oil demand in the automobile sector. Continued improvements in fuel efficiency may reduce demand, and increasing demand from developing countries may be balanced by reduced demand from industrialized countries. Trucks, shipping and aviation, and petrochemicals account for much of the foreseen growth in oil demand.

Some takeaways:

  • Population and economic growth rates are predicted to decline. Growth rates may be slowing in developing countries, the source of most of the projected passenger vehicle oil demand, leading to fewer cars being sold. Fewer cars being sold, including EVs, suggests a future decline in VMT and oil demand in this sector.
  • United States federal policy has increasingly shunned EVs and fuel efficiency improvements.
  • Should government subsidy be eliminated, battery cost makes EVs less competitive with gas or diesel vehicles. The forecasted median date for unsubsidized batteries to become competitive is 2025. The cost threshold is seen as $100/kWh, down from current estimated cost of $175/kWh to $200/kWh.
  • Passenger vehicle oil demand is projected to rise through 2025 and decline thereafter (Figure 1). Between 2018 and 2019 forecasters lowered their oil demand expectations, even with lower projections of EV penetration, pointing toward slowed growth in the developing countries or increased VMT for EVs.
  • The low-carbon projections tended to be optimistic in regard to the market penetration of EVs. By 2040 they expect from 40 to 70 percent of VMT to be driven by EVs, and 60 to 90 percent by 2050. Oil companies and governments tend to be more guarded when forecasting the share of VMT driven by EVs (Figure 2). Some of the low-carbon forecasts may be predictions of what is required to limit warming to 2°C.
  • A decline in passenger vehicle oil demand may not indicate a reduction in total oil demand, since growth is predicted in other sectors.

Figure 1. Forecasts of global passenger sector oil demand in the 2019 survey.


Figure 2. Forecasts of global EV market share of total miles traveled in the 2019 survey.

The author also points out that slowing demand may not soon allow decreased production. “[E]ven without any oil demand growth, investment in new oil supplies would still be needed to offset the expected decline in existing production.”

Michael Brenneis is an Associate Researcher at SSTI.