Speed of the transition
The average gasoline car consumes 12 barrels of oil per year. (source)
That means about 83,333 gasoline cars use 1 million barrels per year.
At the end of 2018 there were about 5 million electric cars on the road (source), displacing 60 million barrels of oil per year.
In order to begin meaningfully displacing oil, 1 million barrels a day I think is a good target. Which means 365 million barrels of oil per year.
This means we would need 30.4 million electric cars on the road to displace about 1 million barrels a day.
Electric car growth is on a nearly exponential curve, so it shouldn’t take to long to reach that metric.
In the year 2018, global electric cars sales stood at 2.2% of all vehicles. (source)
Out of 86 million cars sold, 2.1 million were electric. (source)
It’s possible that 2017 may have been the peak for fossil fuel vehicle sales in Europe, China and USA and that they will be in perpetual decline from here on out. (source)
As a total absolute number there are an estimated 1.4 billion vehicles globally on roads. (source)
If the next 8 years were to match the last 8 years in terms of growth
Between 2010 and 2018, EV’s grew at a rate of production of approximately 60% per year. If we carry that forward linearly, and this is likely very overly optimistic growth would look like the following:
- 2018 – 2.1 million
- 2019 – 3.36 million
- 2020 – 5.38 million
- 2021 – 8.60 million
- 2022 – 13.76 million
- 2023 – 22.02 million
- 2024 – 35.2 million
- 2025 – 56.37 million
- 2026 – 90.19 million
If cars stay in the 60-90 million produced per year range, then EV’s stand to take serious market share away from fossil vehicles in 5-10 years.
The average ICE vehicle in the USA has a life expectancy of about 16 years. (source)
If 86 million cars are produced annualy, and there are about 1.4 billion cars on the road, it would roughly take about 16 years to replace all ICE vehicles post 2026. So it could be that majority of vehicles 75%+ on roads may be electric by 2038.
Effects on global oil consumption
McKinsey estimates that oil consumption will drop to about 82 mbd from a likely high of about 105-110mbd (reached around 2025) by 2035. (source) My personal opinion is that electric car adoption will be much faster than most people realize and I anticpate consumption to drop to about 60mbd by 2040. This would be equivalent to 1986 levels of consumption.
EV vs. oil – from an investment perspective
“For a given capital outlay on oil and renewables, how much useful energy at the wheel do we get? Our analysis indicates that for the same capital outlay today, new wind and solar-energy projects in tandem with battery electric vehicles will produce six to seven times more useful energy at the wheels than will oil at $60 per barrel for gasoline powered light-duty vehicles, and three to four times more than will oil at $60 per barrel for light-duty vehicles running on diesel,”
“As a result, the report says, the long-term break-even oil price for gasoline to remain competitive as a source of mobility is $9 – $10 per barrel, and for diesel $17 – $19 a barrel.”
“To meet 2018 levels of energy demand, the oil industry would have to spend $25 trillion a year for the next 25 years, while to produce the equivalent level of energy from renewables would cost on $4.6 trillion – $5.2 trillion, Lewis says.”
“For the oil majors, the challenge is on a scale that they have never faced before, and business-as-usual is simply not an option,” the bank says, with any projects with break-even costs of $20 a barrel or higher facing the possibility that up to 40% of their output at below the cost of production.” (source)
TaaS (Transportation as a Service) compounding factor
I highly recommend watching the following video. Adoption of electric cars may occur faster than most people anticipate due to self-driving technology chiefly pioneered by Tesla.
Consider the following. “A self-driving EV taxi can replace 7–15 personally owned vehicles, depending on how many rides are shared, so Tesla’s 2023 production could theoretically be the equivalent of replacing 21–45 million vehicles.” (source) – That is near half of global car sales!
But, Renewables get subsidies…if only big oil got that!
From a purely fiscal perspective ignoring externalities, the recent subsidies for fossil fuels globally is around $300-$600 billion annually. (source) Renewables comparatively get for less than that at $100 billion/year in those same years.
If you factor the environmental, social and human costs, deaths due to cancer caused by pollution, etc. Fossil fuels are “subsidized” up to $5 trillion annually. (source)
But oil in countries like Canada has way more environmental regulation than the bloody middle east
Canada might be environmentally regulated, but that does not mean the damage of extraction, and refinement of oil sands is less than light sweet crude in the middle east for example. Oil Shale & Tar Sands are 31% worse in terms of carbon emissions.