By David Doherty, Head of Oil and Renewable Fuels Research, BloombergNEF
Electric vehicles are already displacing nearly 1.8 million barrels of oil every day – roughly the same amount as Mexico consumes. Despite some bumps on the road when it comes to their deployment, that number is set to double by 2027, and triple by 2029, causing oil use in the road sector – the largest demand center for oil – to peak in three years, according to BloombergNEF’s Road Fuel Outlook.
The rapid uptake of passenger EVs in markets like China, Europe and California propels the jump in avoided oil consumption over the coming years as disruption to the status quo spreads beyond the bus, and two- and three- wheeler segments. Without the growth of EVs and fuel cell vehicles, road fuel demand would have risen until 2040.
While China initially led the charge, the impact is visible across multiple markets, leading to a tipping point in the sector. Fuel retailers and convenience store chains with exposure to the sector like Alimentation Couche-Tard Inc and DCC Plc face a shrinking market in regions like the US and Europe.
Fuel producers like Marathon Petroleum Corporation and TotalEnergies are in a slightly better position thanks to their capability to send the fuel they produce to markets further afield with growing demand and not enough supply, like Latin America.
Another benefit is their flexibility and capability to adapt. Refiners like Valero and Neste are among the biggest players in the low-carbon fuels market, and have grown their presence in recent years. However, despite taking a growing fuel share and reducing emissions relative to fossil-derived fuels, bio and renewable fuel demand peaks in 2030 as blend limits cap the upside.
As the need for all types of road gasoline and diesel declines, producers will turn their focus to growth markets for fuels, like aviation and petrochemicals. Without significant policy action or technology disruption, demand for liquids like jet fuel and naphtha continue to power many parts of the global economy.