According to an article published by the UK’s conservative Daily Telegraph newspaper, OPEC and Saudi officials do not believe their own claim that world oil demand will continue to grow due to the rise of electric vehicles (EVs) and the Paris Accord. OPEC was forced to reduce oil output in October and April, and the Saudis surprised traders with a unilateral cut of one million barrels a day in June. This reduction in production coincidentally matches the amount of crude currently being displaced by EV sales worldwide. EVs are predicted to reach 60% of total car sales in China within two years, further impacting oil demand.
The article highlights the challenges OPEC is facing from both the increasing efficiency of petrol and diesel cars, which are gradually replacing vintage models and reducing oil demand, and the rising popularity of EVs. BP predicts that the shift to more efficient petrol and diesel cars alone could reduce global oil demand by up to a tenth by 2040. China, in particular, is experiencing a significant surge in EV sales, surpassing expectations set by Beijing’s New Energy Vehicle Industry Development Plan. China’s EV sales are projected to reach 17 million or 60% of the total market share by 2025 and 90% by 2030. Other countries like Vietnam are also following suit with similar ambitions.
The article suggests that OPEC’s long-held belief that the growing middle class in emerging Asia would offset declining oil use in OECD countries is falling apart under scrutiny. The International Energy Agency (IEA) predicts that global oil demand will peak in 2028 and then decline. However, the Rocky Mountain Institute argues that by 2026, half of global car sales could be EVs, reaching 86% later in the decade. Overall, the article concludes that the decline of oil in the transport sector due to electrification may be closer than anticipated, and OPEC may be on the verge of a “death spiral.”
