The Reign of Oil Will Decline Starting in 2030 With the Arrival of Electric Vehicles and Will Consolidate a New Era of Global Renewable Energy

With the Arrival of New and More Interesting Technologies, Like Electric Vehicles, the Reign of Oil Begins to Decline.

It’s not new that the oil market has started to have headaches due to the emergence of new and more interesting technologies. It’s not hard to predict that, over time, the popularization of alternatives that use renewable energy sources would begin to be favored by the population. Evolution is a sure path, even when we are dealing with numerous variables like the oil industry. And, it seems that the prominence of fossil fuels, such as oil, despite having lasted a long time, is numbered. This is a reflection of the arrival of electric vehicles, which are dominating the automotive market and consolidating as incredible alternatives for a new era of global renewable energy.

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The Scenario of the Decline of the Oil Reign

Various factors, such as the pandemic, energy transition processes, and increasingly efficient means of transportation are revolutionizing the way people move, especially in large cities. The demand for gasoline, which collapsed in 2020 due to lockdowns, had already started to decrease the previous year and, even with the Covid-19 emergency behind us, is unlikely to return to the levels of two years ago.

“Oil demand will evolve in three phases. Until 2025, oil demand is still affected by the impacts of Covid-19, and electric vehicles will take time to take off. Then, from 2025 to 2035, structural declines and substitution impacts—especially in trucks—will take over, and finally, around 2050, plastic recycling and accelerated technologies in the maritime sector will be the final transition stage, further reducing oil demand to 51 million bpd in our average case,” said Rystad Energy’s oil market analyst, Sofia Guidi Di Sante.

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Main Sectors That Will Be Affected by the Change in Oil Demand

Here are some of the sectors that have a high demand for oil:

• Road Transportation (Passenger Vehicles, Buses, and Freight): accounting for over 48% of total fossil fuel demand, this will be the sector that will drive this change in the scenario.
• Trucks: representing 18% of the oil demand range, this will not be the fastest sector to transition, but it will be crucial for significantly increasing the numbers of this change.
• Petrochemical Products: accounting for 14% of total fuel demand. Unlike the other sectors, it is expected to grow at least until the middle of the 2030s.
• Maritime Sector: this sector accounts for 6% of total demand and is expected to be dominated by oil until the mid-2030s. However, after that, it may see changes opting for LNG, hydrogen, electric batteries, and other carbon-neutral vessels, especially in new builds.
• Aviation: the demand for 7% of the fuel is expected to continue growing for at least until 2050, simply because there is currently no viable oil replacement technology.

Electric Vehicles and a Near Future

Although major names in the oil industry still do not see electric vehicles as an alternative that will completely replace fossil fuel-powered models, this is not what major automakers show. Tesla, Chevy, and Nissan have plans to start selling electric cars with long range in the US$30,000 range. Other manufacturers and technology companies are also investing billions in various new models. Already in this early decade, some of them will be cheaper and perform better than gasoline cars. This is a market share strategy and represents a larger segment of the population gaining access to this type of technology.

As early as 2015, global sales of electric vehicles increased by around 60%. This percentage, besides showing the strength with which these new models, which rely on renewable energy as a source, are gaining in the market, also illustrates how this transition can occur faster than we imagined. It is an interesting percentage, nearly equivalent to the annual sales growth rate at Tesla until 2020, and it also aligns with the index that allowed the Ford Model T to leave horses and carriages behind in the 1910s. For comparison, a segment that shows the same prospect is solar panels, which have followed a similar curve, with an annual growth of around 50%, while sales of LED bulbs have been expanding at an impressive rate of 140% per year.

With the oil crash increasingly imminent, and a scenario that has been unfolding in recent years, directing us towards cleaner and renewable alternatives becoming the true protagonists of our daily lives, we can only ride the wave of the future. What we can bet on is that the number of electric cars on the road will only increase while the demand for oil wanes. Thus, someone, with the barrels, will be left watching ships go by.