Electric vehicles and their impact on the oil industry
Trying to find the connection between electric vehicles (EVs) and the oil industry may seem curious at first glance, considering the main feature of EVs is that they don’t need petrol to function. However, EVs are actually instrumental in the shifting demand in the oil industry today.
In fact, the International Energy Agency (IEA) projects that the growing adoption of EVs can potentially cut up to 2.5 million barrels per day of oil demand by 2030. Moreover, improving battery technology and increasing EV charging point installation among homes and commercial establishments have also encouraged more people to switch to EVs, thus further accelerating the displacement of oil use.
Given these figures, EV users may be wondering what exactly is the impact of EVs on the oil industry and why it should matter to them. Thus, here’s a quick overview to help understand the connection better.
Declining demand for oil
According to a report by IEA, the number of EVs on the road are expected to reach 145 million by 2030. This steady increase of EV users presents a challenge for the oil industry as this would mean less demand for traditional fuels as electricity takes over their role in powering up vehicles instead. Governments all over the world are also becoming more aggressive in promoting EVs by enacting policies such as zero emission mandates, which can lead to declining oil demands in those countries. For instance, Norway has already recorded an 8% decline in sales of diesel and motor gasoline at Norwegian gas stations since 2021.
Studies also predict that oil demand for transportation will peak in the near future. Case in point, IEA is expecting global oil consumption to hit a peak of 103 million barrels per day by 2030 as the transportation sector makes the shift from oil to electricity. Seeing as the transport sector is responsible for around 60% of the world’s oil demand, one can easily see how the shift to EVs can lead to the disruption of the global oil industry.
Moreover, the shifting demands for oil will inevitably influence changes in global oil prices. As oil-producing countries and companies adjust to the changing landscape of global energy consumption, the oil industry may experience price fluctuations which can eventually influence long-term oil price trends as well.
Shifting energy investments
As more consumers make the shift to EVs, major players in the oil industry have also started making investments in renewable energy and electric power to diversify their portfolios. One example is how multinational oil and gas company Shell has been putting more emphasis on adding more EV charging stations to their retail operations. Meanwhile, BP—another supermajor in the oil industry—announced in 2023 that it will invest USD 1 billion in EV charging stations across major cities in the United States to meet growing demands for fast-charging infrastructures among EV users.
Such strategic moves are meant to cater to the shifting consumer preferences to EVs while also allowing oil companies to stay competitive in the EV charging market. This could also lead to more accessible charging stations all over the world as oil companies start to actively take part in building and maintaining EV charging infrastructures.
How the oil industry’s transition benefits EV users
These changes in the oil industry can also affect EV users, the most evident of which is the potential for cheaper energy in the future. As oil companies start to invest more on electric power generation, the increased competition in the electricity market could lead to more competitive rates not only for EV users but for consumers in general.
Improved charging accessibility is also another benefit of this transition. With major oil companies expanding their operations to support EV charging as well, EV users can expect charging stations to become more prolific in the years to come. This could help significantly reduce range anxiety among EV users as they would always have access to a charging station. Likewise, this could also convince those who are still on the fence about switching to EVs as they begin to see more infrastructure being built to support EVs.
Another effect of having more players in the EV charging market is that it can accelerate research and development for faster charging technology or longer-lasting batteries, both of which ultimately contribute to the improved driving experience of EV users.
What awaits the oil industry in an EV-dominated future?
Despite the challenges that EVs pose to the oil industry, this doesn’t necessarily mean that only a dire future awaits oil companies. Oil production will still be necessary for many other industries aside from transportation. For instance, by-products of crude oil processing such as asphalt, lubricating oil, and jet fuel are still expected to be on demand.
However, as EV adoption continues to increase in the future, oil companies will certainly have to adapt and expand their stakes to accommodate EV users as well. This could mean developing EV charging infrastructure or entering the electricity market. By making such changes in their operations and investment strategies, oil companies can expect to remain relevant even in an increasingly EV-dominated world.