The Tesla Shock: Global Gasoline Demand Has All But Peaked

The Tesla Shock: Global Gasoline Demand Has All But Peaked
Fotolia

The International Energy Agency forecasts that global gasoline consumption has all but peaked as more efficient cars and the advent of electric vehicles from new players, such as Tesla, halt demand growth in the next 25 years, according to Bloomberg. That shift will have profound consequences for the oil-refining industry. “Electric cars are happening,“ IEA Executive Director Fatih Birol said in an interview in London, adding that their number will rise from little more than 1 million last year to more than 150 million by 2040.

The cresting of gasoline demand shows how rapidly the oil landscape is changing, casting a shadow over an industry that commonly forecasts decades of growth ahead. Royal Dutch Shell, the world’s second-biggest energy company by market value, shocked rivals this month when a senior executive said overall oil demand could peak in as little as five years. The IEA doesn’t share Shell’s pessimism. While the agency anticipates a gasoline peak, it still forecasts overall oil demand growing for several decades because of higher consumption of diesel, fuel oil and jet fuel by the shipping, trucking, aviation and petrochemical industries.

The projections are part of the analysis the Paris-based IEA did for its “World Energy Outlook 2016“ flagship report. The agency forecast that gasoline demand will drop to 22.8 million barrels a day by 2020 from 23 million barrels a day last year. By 2030, consumption will rebound slightly, reaching a peak of 23.1 million barrels a day, before falling again toward 2040. The forecast is more pessimistic than the one released a year ago, when the IEA saw robust demand growth from now until 2030.

Higher gasoline and oil prices could help to cut demand growth. If prices rise, consumers are likely to opt again for more efficient cars. Now, however, car companies, most obviously Tesla, but also incumbents such as General Motors, BMW and Nissan, are putting their money, and reputations, behind electric vehicles. With technology improving, especially for batteries, prices are falling. Tax breaks, particularly in China, are helping sales.