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Abu Dhabi, UAEMonday 17 December 2018

The rise of electric cars could spell bad news for oil producers

Oil demand may peak within 10 years if electric vehicles take off, according to Bank of America Merrill Lynch

The death of a petrol station may be nearer than expected amid the rise of electric vehicles. Shamil Zhumatov / Reuters
The death of a petrol station may be nearer than expected amid the rise of electric vehicles. Shamil Zhumatov / Reuters

As electric vehicles (EVs) gain speed with some of the world’s biggest car makers setting ambitious production targets, oil producers may see demand for their output hit a peak as early as 10 years from now, according to a new report from Bank of America Merrill Lynch (BofAML).

The investment bank expects pure EVs to reach a global penetration of 12 per cent in 2025, increasing to 34 per cent five years later and 90 per cent in 2050.

“Should EVs take off, we would expect peak oil demand within 10 years,” the bank said in its Global Electric Vehicle Primer report. In a scenario where EV sales rise to 75 per cent of sales by 2050, global oil demand would begin to decline in 2030.

Such a scenario is not unimaginable, given the major names in the auto industry that have thrown their weight behind EVs. Volvo announced in July that every car it manufactures from 2019 onwards would be electric or hybrid, a move followed by other big names. Mark Reuss, General Motors executive vice president of product development, purchasing and supply chain said, “General Motors believes in an all-electric future.”

“Although that future won’t happen overnight, GM is committed to driving increased usage and acceptance of electric vehicles through no-compromise solutions that meet our customers’ needs.”

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Also as the business model for EVs requires a different charging format compared to the standard fuel pump, this could also mean the death of the petrol station. BofAML expects significantly less traffic at filling stations, putting at risk earnings expected from attached retail sites. “Big Oil’s hope of maintaining or – as laid out by BP at its recent downstream investor day – even expanding earnings generated from retail sites by offering charging points at filling stations will in our view only work at filling stations targeting long distance traffic – given our expectation of most charging being done at home,” the report said.