Report: Electric Cars Could Cut Oil Demand by 8 Percent

More than a year after oil prices hit rock-bottom amidst a global supply glut, the cost of a barrel of crude is still stuck in the range of $50. The U.S. Energy Information Administration now estimates that prices will remain near current levels through at least the next year, with serious implications for the offshore industry. Adding to these persistent concerns, the biggest organizations in oil, energy and auto manufacturing are all upping their estimates of the future market share of electric cars, according to a new report from Bloomberg New Energy Finance (BNEW). 

BNEW predicts that plug-in vehicles will make up a third of the world's fleet by 2040, or about 530 million cars. If this development proves true, it would cut oil demand by as much as eight million barrels a day – about eight percent of the expected global total, and more than the entire export volume of Saudi Arabia. 

The cause? Falling costs, BNEW says. It expects to see price parity between electric and conventional vehicles in just eight years, thanks in large part to economies of scale in lithium-ion battery production. The price of batteries has fallen by 70 percent since 2010, and it is expected to fall by half again by 2025. 

Other organizations' forecasts of market uptake are more conservative, but they have risen sharply over the past year, Bloomberg reports. OPEC now foresees about 270 million electric vehicles by 2040, and ExxonMobil and BP both put the number at about 100 million. 

Durability could also be a factor in estimates of the world's future electric fleet. Other than battery degradation, which can reduce the range and power of an electric car over time, there is little to go wrong in these vehicles' drivetrains - no internal combustion engine, no transmission and far fewer rotating parts. And data on long-term battery performance in Tesla vehicles suggests that they could retain 90 percent of their original capacity at 200,000 miles and up to 80 percent at 500,000 miles. If these predictions bear fruit, many electric vehicles built today could still be on the road in 2040, increasing their percentage of the world's total vehicle fleet as less-durable gas cars age out.