The Paris-based International Energy Agency (IEA) says up to 12 million barrels per day of oil demand could be displaced by 2035 due to the rapid uptick in electric vehicle usage globally, especially in the United States, the European Union and China. Apparently, the IEA is not aware of a McKinsley & Co. survey that found that 46 percent of U.S. EV owners will buy a gasoline vehicle on their next car purchase instead of an electric vehicle due to issues with charging, cost and utility, particularly on long trips. They also found that to be true for 29 percent of global respondents. IEA must also be unaware that in the United States, electric vehicles on average are sitting on dealer lots almost twice as long as the average time for gasoline vehicles and that traditional car makers are losing substantial sums on their electric vehicles that have to be paid for from their profits on gasoline vehicles. Ford, for example, lost $100,000 per electric vehicle in the first quarter of 2024, which must be made up by increasing the prices of its internal combustion vehicles. Some EV-only car companies are already filing for bankruptcy, such as Fisker Automotive.
Nonetheless, IEA contends that government policy developments, such as Biden’s new emissions standards, continue to support expectations for rapid electrification. If all national energy and climate targets under the U.N.’s IPCC are met, it says that two-thirds of all vehicles sold in 2035 could be electric. Additionally, IEA points to industrial incentives in various economies it says are driving value creation and job opportunities across EV supply chains. It claims that the transition to electric vehicles is gaining momentum.
The IEA does have a less ambitious scenario suggesting that 6 million barrels per day of oil demand could be displaced by 2030, with 10 million barrels per day displaced by 2035. In this scenario, the agency assumes that as soon as 2030, almost one in three cars on the roads in China will be electric, and almost one in five in both the United States and European Union will be electric. The amount of oil reduction in this scenario in 2035 is equivalent to the amount of gasoline used in the United States today. To reach these forecasts, the IEA implements policy developments for swift electrification, such as new emissions standards adopted in Canada, the European Union and the United States over the past year and industrial incentives – such as those in the U.S. Inflation Reduction Act, the EU Net Zero Industry Act, China’s 14th Five-Year Plan, and India’s PLI scheme. If all the national energy and climate targets made by governments are met in full and on time, as in IEA’s Announced Pledges Scenario, the agency expects two-thirds of all vehicles sold in 2035 to be electric, displacing around 12 million barrels per day of oil.
In 2023, only 10 percent of electric car sales were in the United States with 60 percent in China and 25 percent in Europe. These regions accounted for around 65 percent of total car sales worldwide, pointing out that sales of electric models remain more geographically concentrated than those of conventional ones due to the above-mentioned, pro-electric vehicle policies and regulations in those countries. That is, government policy is being used to replace individual choice in vehicle selection.
According to IEA, growth in EV sales picked up in 2023 in countries such as Viet Nam (around 15 percent of all cars sold) and Thailand (10 percent). In emerging economies with large car markets, shares are still relatively low, however. In India, electric cars have a 2 percent market share, but the country’s Production Linked Incentives (PLI) Scheme is supporting domestic manufacturing that encourages IEA to assume growth there. In Brazil (with a 3 percent share), Indonesia and Malaysia (each with a 2 percent share), and Thailand, cheaper models, mainly from Chinese brands, are making inroads in those markets. In Mexico, IEA says EV supply chains are developing due to access to subsidies from the U.S. Inflation Reduction Act. China’s BYD is looking to build a factory in Mexico to avoid U.S. tariffs on China made electric vehicles.
According to IEA, the global number of installed public charging points was up 40 percent in 2023 relative to 2022, and growth for fast chargers outpaced that of slower ones, due to targeted policies in major EV markets. IEA, however, fails to mention that in the United States only 7 charging stations were completed along major highways in three years as part of the National Electric Vehicle Infrastructure program despite legislation to support construction of a half million. IEA does say, that to reach EV deployment levels in the Announced Policies Scenario, public charging needs to increase sixfold by 2035, which if history is an example could be difficult in the United States despite approved government funding.
According to the McKinley & Co. survey, cost is a factor in EV ownership. IEA recognizes that a rapid transition to electric vehicles will require bringing to market more affordable models. Electric cars remain more expensive than cars with internal combustion engines in most markets. IEA estimates that although more than 60 percent of electric cars sold in China in 2023 were cheaper than their average combustion engine equivalent, electric cars in Europe and the United States are 10 percent to 50 percent more expensive than combustion engine equivalents, depending on the country and car segment. According to IEA, current trends suggest that price parity could be reached by 2030 in major EV markets outside China for most models. That, however, may depend on cheaper Chinese brands reaching U.S. and EU markets despite both implementing tariffs on China’s electric vehicles.
IEA indicates that recycling and reuse are needed for supply chain sustainability and security. It says that in 2023 global battery recycling capacity reached 300 gigawatt-hours and if all announced projects materialize, it could exceed 1,500 gigawatt-hours in 2030, of which 70 percent would be in China. Interestingly, the agency says that announced global recycling capacity would be more than three times the supply of batteries that could potentially be recycled in 2030. If that is the case, why would companies invest in the recycling business?
IEA also failed to consider the example of Norway, where two-thirds of vehicles sold are electric, but those EV owners are also buying and using more internal combustion fueled vehicles. In fact, the country’s oil use has increased.
Conclusion
IEA is again painting a rosy picture for EV adoption and oil displacement as it makes its scenarios show what it would like to occur and not necessarily what current markets show, at least not in the United States where electric vehicles are sitting on dealer lots for twice as long as gasoline vehicles and where 46 percent of current EV owners surveyed indicate that they will not buy an electric vehicle for their next car purchase. Car purchasers are still worried about cost, availability of charging stations, and utility of an electric vehicle, particularly on long trips. But, nonetheless, IEA assumes that if government policies and regulations advantage electric vehicles, manufacturers will comply, despite their current large losses on manufacturing them, and buyers will invest. IEA keeps predicting that oil, natural gas and coal will go away, but the record is showing just the opposite.
