Are Electric Vehicles Pushing Oil Demand Over a Cliff?

With China now planning to phase out gas-powered cars, automakers are talking about an all-electric future.  It could mean a big drop in emissions.

A research note from Barclay's Bank last week summed up what the boom in electric vehicles, along with gains in fuel efficiency, might mean for oil demand—a reduction, by 2025, almost as large as Iran's total production.  And if electric vehicles seize a third of the car market by 2040, the drop in demand would be nearly as much as Saudi Arabia produces.

That kind of jaw-dropping outlook has become increasingly common in recent months amid signs that a tipping point is coming for electric vehicles.

The technology breakthroughs, market forces, and government policies might also augur a peak in oil demand, and that would be a big step toward wiping out emissions of greenhouse gases from the automotive tailpipe.

From Europe to Asia, and in parts of the United States, policymakers are talking about how to make it happen.

France and Britain committed in July to ban the sales of all gasoline- and diesel-powered cars by 2040, motivated largely by health concerns about air pollution.  Then China, the world's largest auto market, announced last month that it will set a deadline for automakers to stop selling internal combustion engine vehicles and set emissions targets for automakers.  California officials said they want to follow suit.

Major automakers have been falling over each other in recent weeks to announce plans for electric vehicle fleets and the phase out of internal combustion cars.  General Motors said it would launch 20 new all-electric models by 2023, including two within the next 18 months.  Its global products chief, Mark Reuss, declared that "General Motors believes in an all-electric future."  It seems the question is when, not whether.

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