EV Push by China, India Threatens Oil Industry

The massive shift to electrified cars envisioned in China and India may trigger a drop in demand for gasoline in less than 10 years, Reuters says.

The news agency cites the somber tone of the Asia Oil & Gas Conference this week in Kuala Lumpur. A decade from now “our gasoline market might not be the same as it is today,” concedes Bahrain Petroleum Co. board member Dawood Nassif.

Reuters notes that more than one-third of the world’s oil refineries are in Asia, compared with 18% in 1990. It points out that demand for the output of those facilities will be challenged if China and India make good on their aims to slash gasoline usage. China targets annual sales of alternative-energy vehicles at 7 million units by 2025. India is pondering a plan to electrify all new vehicles sold in the country by 2032.

Those goals, coupled with a sharp upswing in EV sales plans among European carmakers, could accelerate the expected peak in demand for gasoline, the International Energy Agency tells Reuters. IEA plans to revisit its current estimate that global oil demand will reach its zenith in 2040. Financial rating agency Moody's Investors Service cautions that the financial effect of declining oil demand “could be material by the 2020s.”

Gasoline is one of the energy industry’s most profitable products and currently accounts for as much as 45% of refinery output. Many oil companies tell Reuters they’re confident they can shift their product mix if necessary into such products as plastics and household chemicals. Some, such as Royal Dutch Shell, are studying the notion of adding electric vehicle charge points at their retail service stations.

“Our industry,” declares a senior executive with Saudi Aramco, the world’s largest oil exporter, “will not disappear.”