INDUSTRY
U.S. Oil Demand May Fall by 24% in Nine Years Due to EVs By: Ian Palmer
T
he renewable energy snowball has begun to roll, and power sources like wind and solar are increasing rapidly. It’s hard not to notice if you have to pass one of those giant wind turbine blades being trucked along the highway. In President Biden’s proposed budget, he has inserted a big chunk of money aimed at arresting climate change and including spurs for renewable energy. For example, the Energy Department would increase by about 10% overall, with $8 billion (an increase of 27%) directed at a new generation of electric vehicles, nuclear reactors and other alternatives to burning fossil fuels. The cost of solar and wind generators has come down to 33% and 50% respectively since 2015, and the price of batteries for storing electricity has been halved in the past few years. The case for using renewables to reduce greenhouse gases (GHG) in the atmosphere has received a lot of attention, with a goal to avoid the worst effects of global warming. It’s not hard to see that renewables will increase over time and that fossil energies will decrease. The coal industry has been forced to accept this. But the oil and gas industry in the U.S., which has been particularly successful in their shale revolution the last 20 years, is reluctant. And understandably so, because they see profits falling and jobs going away. This decline in oil and gas production — will it be slow or rapid? A gradual adjustment or a painful disruption? Some answers come by putting numbers on the U.S. greening of electricity and transportation, two of the largest users of oil and gas. The analysis is simplified but insightful. Let’s begin with fossil fuel consumption in the U.S. in the year 2018. Figure 1 compares this against renewables and nuclear. The approach is to look at goals for renewable increases (called greening) and convert these to fossil fuel decreases based on a zero-sum replacement in Figure 1.
Greening of transport The transport sector works primarily off oil, which refineries convert into gasoline. Cars and trucks are going green at a rapid rate in some countries. Norway leads the pack with 60% of electric vehicles in new car sales (Figure 2). The US lags seriously. Volkswagen recently announced its dive into electrified vehicles (EV). The basic SRV, called ID.4, will be priced at $40,000 and have a range of 250 miles. Volkswagen’s target is a million EV sales in 2021. Apparently, they even plan to build their own charging stations across the U.S.
Figure 2. Projected uptake of electric vehicles as a percentage of sales by country. Source: AUSTRALIAN GOVERNMENT, DEPARTMENT OF INFRASTRUCTURE, TRANSPORT, REGIONAL DEVELOPMENT AND COMMUNICATIONS.
Figure 1. US energy consumption by source and sector. Source: IEA.
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SHALE MAGAZINE SEPT/OCT 2021
In the U.S., cars have started going electrical, but plug-ins are less than 2% of all U.S. cars on the road, and widespread adoption will be dubious if charging stations are not built quickly enough. Figure 1 shows that oil usage in U.S. transportation was 26 quads in 2018. Biden’s goal is that new sales of EVs will be 50% of all sales by 2030. If this means about a third of all vehicles on the road are electric by 2040, then 26 quads of transportation petroleum (oil) will have declined by close to 9 quads. Since total petroleum usage is 37 quads in Figure 1, this 9-quad decline implies a 24% decline in consumption of oil in the U.S. by 2030. But if industrial usage of petroleum also falls, as expected, the number would be greater than 24%.
