Parallel Paths: EVs and Oil on the Rise, a Case Study

Electric vehicle sales has exploded in Norway alongside of increasing oil demand. Is it a given that more EVs translate to less demand for oil?

The “peak demand” hypothesis is based on a single premise:  that demand for oil will peak as alternatives to oil become widespread. In support of this hypothesis is the notion that peak demand will happen within the next few years – and that EVs will be the primary driving force behind this shift.  None other than the New York Times said as much just one year ago (“Oil Industry’s New Threat? the Global Growth of Electric Cars,” by Justin Gillis; Nov. 7, 2016, NYT).  However, a comparison of Norway’s recent experience with EV sales and oil consumption suggests that perhaps this hypothesis might be fundamentally wrong.

In response to generous incentives and some of the highest gasoline prices in the world, Norway’s electric vehicle (EV) sales have grown at the fastest rate as that of any other country in the world. The statistics are staggering:

  • Over the past seven years, Norway’s EV sales have averaged more than a 90% annual growth rate;
  • It was recently announced that 42% of all Norway’s new car sales in June 2017 were EVs;
  • In 2005, there were 167 electric vehicles on Norway’s roads, but by 2015, that number had exploded to just under 40,000;
  • At the end of 2016, EVs had achieved a 5% share of all passenger cars on the country’s roads. This is greater than five times the market share in the U.S.

Given Norway’s global EV leadership, if the “peak demand” hypothesis were true, then the rise of EV sales should have a negative impact on the country’s oil demand.  And yet, just the opposite has taken place:

  • Norway’s oil consumption in 2015 was 6% higher than it was in 2005.
  • Norway’s petroleum demand remained flat from 2005 thru 2015, and then has been increasing in the years since (228,000 bpd in 2015 vs. 234,000 bpd in 2016)
  • In 2016, when Norway’s EV sales eclipsed 50,000 vehicles and reached a 5% market share, oil demand rose to within 0.7% of its all-time high mark set in 2013.

There are some legitimate reasons why Norway’s oil consumption grew even as EV sales were skyrocketing. A growing population can help explain this discrepancy. But it becomes harder to rationalize when Norway’s oil consumption growth is compared to that of its peers. For instance, the EU as a whole and all of Norway’s neighbors saw oil demand decline over the past decade:

The exception to declining oil consumption throughout Europe was the phenomenon happening in world’s leading EV market!

There is no way to know if peak demand is a “thing.”  Some believe that it isn’t.  Pulitzer Prize winning author Daniel Yergin has always argued against it, while others see oil E&P following a Silicon Valley-like “Moore’s Law” (an observation made by Intel co-founder Gordon Moore in 1965, that the number of transistors per square inch on integrated circuits would double every year since invention).  Either way, “peak demand” will not happen as quickly as proponents think because the relationship between EVs and oil is more complicated than “More EVs = Less oil demand.” The case study of Norway shows that it isn’t as simple as that. Indeed, the U.S. is well behind Norway in both EV per capita market share and EV growth rate.  Since the US is a more powerful global market, the complicated relationship between EVs and oil might suggest that peak demand in the US will not arrive for a very long time … if it ever will.

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This article contains excerts from a number of sources. The original full articles can be found from the following links.

Forbes
LinkedIn
Energy Trends Insider

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