Report also highlights that bans on plastic, more efficient use of plastics, and recycling may have a significant impact on oil’s future
Accelerated electric vehicle (EV) uptake could result in oil, unexpectedly, reaching a peak in demand as early as 2025 and decrease quickly thereafter, according to new research.
The Global Energy Perspective: Accelerated Transition Outlook report, released by McKinsey Energy Insights (MEI), identifies eight shifts that could accelerate the energy transition with two of the most significant around EVs and plastic reduction.
MEI anticipates that EVs could account for two thirds of total global vehicle sales (65 per cent) by 2035, equating to 70 million vehicles per year.
These latest findings are constructed from MEI’s Global Energy Perspective Reference Case which captures McKinsey’s view on how energy demand may evolve over the next few decades.
The accelerated transition scenario uncovers that over one million new EVs were sold last year alone and in the past five years the cost of battery packs has decreased on average by 15-20 per cent per year – much faster than expected.
“It’s conceivable that by 2050, in China and most OECD countries, virtually all cars on the road could be electric – dramatically impacting oil demand"
This would lead to a third of the global fleet being electric in 2035 and more than 80 per cent in 2050, which minimises oil demand from transport, today’s biggest oil demand sector.
“The energy landscape is changing rapidly. Over 200 European cities already have low emission zones and cities like Paris have announced diesel bans by 2025,” said Jasper van de Staaij, associate partner at MEI.
“It’s conceivable that by 2050, in China and most OECD countries, virtually all cars on the road could be electric – dramatically impacting oil demand. Battery costs are already tumbling, which will make EV cost of ownership, including the fuel, lower than owning a diesel or petrol car.”
The scenario also highlights that plastic bans, more efficient use of plastics, and recycling may have a significant impact on oil’s future. If plastic demand growth slows down and recycling uptake continues to increase to 40 per cent in 2050, this slows down the need for new virgin plastic and therefore reduce oil demand by around 30 per cent.
MEI’s outlook identifies the impact of eight potential shifts that could further accelerate the transition. Other notable key insights include: carbon emissions may remain well above a 2-degree Celsius pathway; fossil fuel demand decrease will be disproportionally large compared to power demand increase; gas demand will continue to grow as its role in the energy system remains stable; and coal demand will decrease rapidly.
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