IEA: Growth in Electric Vehicles Won't Dent Oil Demand Much

From 2017 to 2040, global solar power capability will show annual increases greater than any other energy source, Paris-based agency says.

Mason Coberly/Vivint Solar

Amid an anticipated increase in electric vehicles during the next 20 years, the world's appetite for oil is still expected to wane just a bit, as demand for transportation including petrochemicals continues, the International Energy Agency said Tuesday.

An estimated 50 million vehicles will be in operation by 2025 and 300 million by 2040, versus about 2 million currently, the IEA said. But that's expected to reduce global demand by just 2.5 million barrels a day, or roughly 2 percent, by then.

The U.S. will be a major player in global oil and gas markets for years as the shale industry boom transforms into the largest supply increase ever, the agency said in its annual World Energy Outlook. The cycle will change the U.S. into a net exporter of fossil fuels, with growth in U.S. oil production hitting that accomplished by Saudi Arabia at its peak, it said.

The Paris-based IEA said it had trimmed its longer-term oil-price estimates from 2016, in part due to the declining cost of conventional and renewable energy sources, global efforts to curb climate change, and the boom in U.S. shale oil and gas production.

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It is now calling for oil to run $83 a barrel in 2025, compared to its prior $101-a-barrel call, and to $111 in 2040 from its previous $125 estimate. World consumption will just top $100 million barrels of oil daily by 2025.

From this year to 2040, the world's solar power capability will show larger annual increases than any other energy source, with a yearly average expansion of almost 70 gigawatts, the IEA said.

“Solar is forging ahead in global power markets as it becomes the cheapest source of electricity generation in many places, including China and India,” Fatih Birol, the IEA’s executive director, said in a release. “Electric vehicles are in the fast lane as a result of government support and declining battery costs but it is far too early to write the obituary of oil, as growth for trucks, petrochemicals, shipping and aviation keep pushing demand higher."

"The U.S. becomes the undisputed leader for oil and gas production for decades, which represents a major upheaval for international market dynamics," Birol added.