The global peak in oil consumption may already be past us,
according to a new report from Carbon Tracker�â€” and China and
India’s rapid transition to low carbon transport is the reason
report released Friday underscores the role that transportation
in emerging economies will play in future oil demand, and how
quickly falling battery costs and increasingly
aggressive decarbonization policies are accelerating the shift from
fossil-fueled to electric vehicles.
Data from the International Energy Agency (IEA) shows that 80
percent of the projected growth in demand for oil from now to 2030
is from transport in emerging economies. China and India are
responsible for half of that projected growth.
But the IEA’s current forecasts haven’t yet accounted for the
dramatic policy shifts coming from Beijing. In September,
China’s President Xi Jinping told the UN General Assembly that the
country was aiming to hit peak carbon in 2030 and become
carbon neutral by 2060. The details will be laid out in the
country’s 14th 5-year plan.
Kingsmill Bond, the Carbon Tracker reportâ€™s lead author, told
GTM that the shift implied in China’s announcement adds important
new data to future oil demand projections.
â€œWe’ve demonstrated that the key driver of expected oil demand
growth in the next decade, if you take the business as usual step
scenario, is in fact emerging market transportation,â€ he said.
But if future transport electrifies, “it basically means that the
demand [from transport] is essentially flat, and that therefore
removes almost all of the demand growth for oil.”
“It’s a really significant issue,â€ he added. While aviation
and shipping also account for a portion of future oil growth, 92
percent of transportation in emerging economies is road
How likely is Chinaâ€™s electrification?
China is the worldâ€™s biggest oil importer, buying 70 percent
of the oil it uses from overseas. That makes slashing its oil use
not only a sound decarbonization strategy, but a boost to
its energy security and global diplomatic posture.
â€œEnergy security is firmly on Beijingâ€™s radar amid rising
tensions with the West,â€ Hugo Brennan, principal Asia analyst at
Verisk Maplecroft, told GTM in an email.
â€œChina is the worldâ€™s largest importer of crude oil and
Beijing is acutely aware that this represents a strategic
vulnerability. Beijing is keen to reduce its heavy dependence on
foreign oil, particularly seaborne supply from politically unstable
regions that must transit strategic chokepoints,â€ he added.
EV adoption rates around the world suggest China is far from a
laggard. (Credit: Carbon Tracker)
Bond points to the fact that electrification is well underway in
China, with 60 percent of two-wheelers and 60 percent of buses
electrified. The countryâ€™s Ministry of Industry and Information
Technology said in October that to hit the 2060 goal, all car sales
in China will need to be EV or hybrid by 2035.
Many oil majors are already preparing for this scenario by
boosting their capabilities in EV infrastructure and hydrogen. Last
week, Shell signed off on its
first commercial hydrogen project in China. BP is the EV
charging partner of DiDi, Chinaâ€™s equivalent of Uber. DiDi and
BYD are building a new EV designed specifically for
Electrification one wheel at a time
The situation in India is a little more complicated, Carbon
Tracker’s Bond noted.
â€œIt’s very hard for the Indian government to mandate high
sales of electric vehicles,â€ he said, given that that could mean
â€œsubsidizing electric vehicles for rich people in a very poor
country. That’s never going to work.â€
What is playing out in India is the seemingly inevitable
economics of falling battery costs. The cost of an electric-powered
and a petrol-powered three-wheeled rickshaw are now equal, so the
lower running costs of an e-rickshaw are winning out, he said.
In 2018-2019, 3.38 million passenger cars were sold in India
compared to 21.18
million two-wheelers, according to auto-industry figures. Bond
expects that as battery prices continue to fall, two-wheel
transport will follow rickshaws and become dominated by
Ultimately, building out transportation infrastructure from a
lower base provides emerging economies a chance to leapfrog to the
â€œThe average person in the United States uses 1.9 tons of oil
a year for transportation. The average person in India uses 0.1
tons,” he said. “So, if you’re the Indian government today, you’ve
got to either build out a network of refineries and metro stations
and pipelines, or you’ve got to build out a grid network one or the
Given that one-system offers energy independence and the many
benefits of improved air quality and lower carbon, Bond is
confident of the direction of travel: â€œIt’s much more likely that
you’re going to build an electric-based transport system than an
oil-based one because it’s the future, basically.â€
Source: FS – GreenTech Media
Report: Rapid Transport Decarbonization Means We’ve Probably
Passed Peak Oil