Electric vehicles will be one of the factors driving down demand for oil

17 march 2017

"There is growing uncertainty regarding future demand for oil in the world," said Analytical Center expert Alexander Amiragyan, speaking at the international forum Oil Refinery and Electric Vehicles. According to the expert, there are a number of factors contributing to this uncertainty such as the slowing down of the global GDP growth (including in the emerging markets), the falling oil consumption in the developed countries, worsening environmental problems in major cities and the need to limit motor vehicle exhaust emissions. The growing competition between different types of transport fuel (natural gas, electric power) is also playing a part, as is the desire of many countries to reduce their dependence on external energy sources, including by means of promoting domestic fuels. In light of all that, wide adoption of electric vehicles is going to put additional downward pressure on the demand for motor fuels.

For Russia the projected demand in Europe is of special importance, seeing how Europe is the main export market for Russian oil and diesel fuel, Alexander Amiragyan noted. Total consumption of petroleum products in Europe has been declining since the mid 2000s, but there has been an increase in the consumption of diesel fuel. However, the basic scenario in the forecast of the International Energy Agency expects demand for transport fuel in Europe to fall by 15% by 2025 and by 35% by 2040 on the 2014 level. Demand for fuel is going to be falling as internal combustion vehicles become more fuel efficient and as alternative fuels get adopted in transport (such as natural gas and electric power).

As demand for oil and petroleum products declines in Europe, Russia will have to diversify its clientèle, first of all, by expanding east, primarily into China and Southern Asia.

According to Mr. Amiragyan, the future of electric vehicles depends on a whole slew of factors. These include whether or not it will be possible to slash the prices of electric vehicles while improving their performance (first of all mileage per charge) and offering a broader model range, on whether a widely-available charging infrastructure can be put in place in short order as well as how tough the competition is going to be from the new generation of fuel-efficient internal combustion engine vehicles.

In recent year, the production costs of an electric vehicle battery (the component that makes up the bulk of the final selling price of an electric vehicle) has fallen fivefold (from $1,000 to $200 per KWH), and it is projected that over the next 5 years it is going to fall to $130-150 per KWH. It is expected that this will allow electric vehicles to successfully compete against vehicles with internal combustion engines without the help of state subsidies. However, these developments are going to be happening first in countries with relatively high gasoline and diesel fuel prices, where people will be able to save money by switching to electric vehicles.