After petrol fueled a car culture in the 20th century that reshaped cities and defined modern travel, this year was expected to begin its long farewell. That didn’t happen.
Of course, in 2023 Tesla Inc. and its competitors have sold more electric cars than ever before, reducing demand for fossil fuels. In the wealthy suburbs of London, New York and Beijing, electric cars are a common sight. From this limited perspective, it appears that the world has already begun the “fossil fuel transition” as agreed at the recent COP28 climate summit. But this is a mirage.
Even as sales of electric vehicles increase, the global oil industry sold more gasoline than ever before this year, surpassing the previous peak in 2019, which the International Energy Agency expects will remain unchanged for all time. Outside the wealthy neighborhoods, the internal combustion engine still rules; in middle- and working-class areas, the energy transition remains a distant prospect.
Since the 1950s, when Henry Ford’s dream of an automobile in every middle-class American driveway became a reality, gas stations have appeared near drive-in restaurants and shopping centers, changing the landscape of the United States and economies across the world. Gasoline used to power cars makes up roughly one out of every four barrels of petroleum products consumed worldwide.
As the climate crisis gains more attention, this fuel is destined to play a prominent role in the energy transition—an early indicator of whether and at what speed the transition away from fossil fuels is taking place. The theory is that as electric cars grow in popularity, demand for gasoline will be “disproportionately” affected, the International Energy Agency (IEA) predicted in its latest five-year oil forecast, published in June. “This means that the fuel is likely to show the earliest and most pronounced peak in demand” of all the fractions of the oil barrel, she added.
While consumption will recover this year, it will not reach pre-pandemic levels; forecasts are for a smooth but steady downward trend. In the middle of the year, the IEA predicted that gasoline consumption “will never return to the levels of 2019, when demand reached 26.7 million barrels per day.” Instead, consumption rose to about 26.9 million barrels a day this year, according to the latest IEA figures. And in 2024, a new, albeit small, increase to just over 27 million barrels per day is looming. Currently, peak gasoline demand is pushed back five years, from 2019 to 2024. And I wouldn’t be surprised if, as more data becomes available and forecasts are updated, the peak is pushed back even further.
The surge since the 2019 peak is particularly significant as it comes amid three notable headwinds: gasoline prices are high, particularly in local currencies outside the US dollar world; working from home remains far more common than before the pandemic, and China’s economic growth is slowing.
The trend is that weaning off fossil fuels will take longer than many expected.
It’s not all bad. The world is embracing electric cars and over time their market share will continue to increase, especially in China, North America and Western Europe – thanks to generous subsidies in many countries. Even if demand for gasoline continues to increase, the rate of growth is slowing. We may not have peaked, but we probably don’t have much growth ahead either.
Still, the demand for gasoline is driven by one powerful force: the world is getting richer. About 1.1 billion passenger cars will be in use in 2023, up from about 850 million ten years earlier. Even as an increasing percentage of these cars are powered by batteries, the absolute number of cars with gasoline engines has increased. This is a trend that will take decades rather than years to reverse.
Until then, gasoline will remain king – whatever the forecasts say.
Javier Blas’s analysis was published in Bloomberg TV Bulgaria. He is a Bloomberg energy and commodities columnist. He is the co-author of the book “The World for Sale: Money, Power, and the Merchants Who Exchange the Earth’s Resources.”
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2023-12-29 18:45:00
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