How electric vehicles can accelerate the end of the petroleum era
Background
At the COP28 climate conference held in Dubai, there have been many intense discussions about the slow pace of reducing fossil fuel consumption to combat climate change. However, one positive point that participants can point out is that the number of electric vehicles worldwide is increasing, already generating a surprisingly large demand.
Industry experts predict an earlier peak in global petroleum consumption due to the recent growth in electric vehicle sales. Consumers are able to overcome the sometimes staggering high sticker prices of battery-powered vehicles thanks to public subsidies and technological improvements.
The International Energy Agency (IEA), based in Paris and made up of 29 advanced countries, has regularly adjusted its forecasts since the 2017 prediction of nearly 100.3 million barrels per day to peak at around 100.3 million barrels per day by the end of this century. It is expected to reach a peak of 100.5 million barrels per day by 2040.
Apostolos Petropoulos, an energy modeler at the IEA, stated that supporting the transition to electrification as a policy has significantly reduced the demand for petroleum in the transportation sector, which has been a key driver of global petroleum demand growth.
Forecast
BP, a large petroleum company, is advancing its global peak petroleum demand forecast, while the governments of the two largest petroleum-consuming countries, the USA and China, are gradually reducing their domestic consumption estimates.
According to the IEA, trucking accounts for about 60% of the world's petroleum demand, with the USA alone accounting for about 10%. The IEA expects that by 2030, approximately 5 million barrels per day of the world's petroleum demand will be lost due to EVs, so this proportion should decrease.
According to the IEA, global EV sales currently account for about 13% of total automobile sales, and could rise to 40-45% of the market by the end of 2020. This increase is thanks to the combination of increasingly strict efficiency standards introduced by governments worldwide since the 2015 Paris Agreement to keep global warming within 1.5 degrees Celsius (2.7 degrees Fahrenheit) of pre-industrial levels, and various subsidies.
The latest subsidy policy includes a $7,500 tax deduction for new car purchases under the US Inflation Control Act, passed last year, aimed at offsetting the high sticker price.
While these figures are significant, the IEA states that to meet the goals of the Paris Agreement in curbing global warming, EV sales need to increase even further, reaching around 70% of the market by 2030.
It is uncertain whether the revenue can reach such heights.
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In recent weeks, EV makers such as Tesla have been delaying or canceling production acceleration plans due to rising labor costs and interest rate increases, which are signs of slowing growth in the United States.
However, some researchers are optimistic because the cost of EV batteries is declining in the long term.
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