It's a start, but there's a long way to go yet...
As the automotive industry continues to recover from the pandemic and other supply chain disruptions, some trends are becoming clearer. One of them is the decline of internal combustion engine (ICE) vehicle sales, as more and more consumers opt for electric, plug-in hybrid, and fuel cell vehicles.
This shift is driven by a combination of factors, including environmental concerns, regulatory pressures, technological advancements, and changing consumer preferences. A report from Bloomberg New Energy Finance says, "it’s becoming clearer that sales of internal combustion vehicles are unlikely to ever return to pre-pandemic levels.
During the height of the market in 2017, a total of 86 million ICE vehicles were sold, which includes hybrids such as the Toyota Prius as they are only gasoline-powered. At the time, electric and plug-in hybrid models made up only a small fraction of the market, with a combined total of just over 1 million vehicles sold.
However, last year the landscape of the automotive industry looked markedly dissimilar. Sales of ICE vehicles had dropped by almost 20% from their peak, to 69 million, while plug-in vehicles had surged to 10.4 million. That being said, even if plug-in hybrid vehicles were added to the ICE category, the overall picture remains largely unchanged.
BNEF expects "the global combustion vehicle fleet to be relatively steady for the next three years before starting to decline in earnest from 2026 onward as the EV fleet swells."
Nonetheless, what ultimately counts for oil demand is the replacement of existing vehicles with new ones, and that's why the peak of oil consumption is expected to occur around 2027. This projection is significantly earlier than what was anticipated just a few years ago in 2016, when estimates suggested that the year of peak oil consumption would be 2036. However, more recently, the International Energy Agency has predicted that global fossil fuel demand will reach its peak within this decade.
IEA Executive Director Fatih Birol said, “Even with today’s policy settings, the energy world is shifting dramatically before our eyes. Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system.”
You can read the full World Energy Outlook report from 2022 here.