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May 28th, 2018 at 9:40 am

Electric vehicles begin to bite into oil demand

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Employees work on the assembly line of the electric bus at a BYD’s production base on January 23, 2018 in Xi’an, China. China’s largest electric carmaker BYD sold 113,669 new energy vehicles in 2017, up 13.4 percent year-on-year. (Photo by VCG/Getty Images)

Projections have suggested that the advent of electric vehicles will have a dramatic impact on oil demand and now its starting to show. With China adding the equivalent of London’s bus fleet every 5 weeks, that’s 279,000 barrels of oil a day removed from demand.

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The latest report from Bloomberg New Energy shows that economics are driving the change, with the total cost of ownership of electric buses far outperforming the alternatives. The report says a 110kWh battery e-bus coupled with the most expensive wireless charging reaches parity with a diesel bus on total cost of ownership at around 60,000 km traveled per year (37,000 miles). This means that a bus with the smallest battery, even when coupled with the most expensive charging option, would be cheaper to run in a medium-sized city, where buses travel on average 170km/day (106 miles).

Today large cities with high annual bus mileages therefore choose from a number of electric options, all cheaper than diesel and CNG buses. The BNEF report says, ‘Even the most expensive electric bus at 80,000km per year has a TCO of $0.92/km, just at par with diesel buses. Compared to a CNG bus, it is around $0.11/km cheaper in terms of the TCO. This indicates that in a megacity, where buses travel at least 220km/day, using even the most expensive 350kWh e-bus instead of a CNG bus could bring around $130,000 in operational cost savings over the 15-year lifetime of a bus.

For every 1,000 battery-powered buses on the road, about 500 barrels a day of diesel fuel will be displaced from the market, according to BNEF calculations. In 2018, the volume of oil-based fuel demand that buses remove from the market may rise 37 % to 279,000 barrels a day, or approximately the equivalent of the oil consumption of Greece. By 2040, this number could rise as high as 8 million barrels per day (bpd).

This will make a significant dent in oil demand but overall the market appears confident that petrochemicals will make up the difference in demand. That question remains open however, as the plastics market particularly continues to evolve.

Stephen George, chief economist at KBC, agrees with the International Energy Agency predictions that petrochemicals will grow to replace transport fuel demand. His projections don’t show a peak in oil demand, rather a plateau around 2040 ranging between 110 and 110 million bpd, with no signs of a peak and drop by 2050.

He does accept that everybody uses different scenarios and that the strategies need to be resilient in facing market change and says, “I see the majors embracing renewables more than previously.” Oil demand however will continue to increase due predominantly to plastics growth.

Today the U.S. is the biggest per capita consumer of plastics at 150 kg per person per year. That includes bottles, packaging, durable goods (many cars now built out of plastic); 3-d printing and a myriad number of uses. Europe and Japan are not far behind and George predicts that demographics and the growth of the middle class will drive up the global average which is currently 45 kgs per person per year.

China alone has gone from 5kgs to the global average in 5 years and is expected to drag the global average up as it grows. India is bound to follow and while its consumption is roughly around 8-10kgs per capita this is likely to develop rapidly.

So it’s the downstream derivatives of oil that are going to drive demand with George saying, “150kgs per capita is the non combustible oil demand that replaces the transport fuel demand.”

The real question it seems is whether this will be new plastics, or recycled and reused. New methods are arising constantly, driven by new regulation and breakthroughs in technology. In April 2018, it was announced that scientists had accidently discovered an enzyme that eats plastic, which when scaled up could have a significant impact on the way in which plastic is treated within the economy.

At the moment it ends up predominantly as a waste product, clogging up pipes, water sources, beaches and in dumps. If we find a plastics breakthrough, from recycling, to bioplastics to new forms of processing, the future line of oil demand could look very different.

Via Forbes 

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