Asian economies and electric carmakers are going to be key players in this unfolding scenario.
Oil and auto executives have disclosed, with India and China shifting their focus from gas-guzzling gasoline engine powered cars to electric vehicles, demand for gasoline is likely to peak much earlier than expected.
The biggest source of revenue for gasoline producers and refiners will disappear in the coming years.
The change is being prompted by policy moves in India and China’s respective governments who are all out to grab a slice of the fast growing green car market while trying to rein in rampant pollution.
While China has released a modest “road map” in which it has stated its vision of alternate-fuel vehicles cornering at least one-fifth of the 35 million annual vehicle sales projected by 2025, India has taken a stronger bolder move of and is supportive of electrifying all vehicles in the country by 2032, said sources familiar with the matter at hand.
“We will see a clear shift to electric cars. It’s driven by legislation so electric cars are coming, it’s not a niche anymore,” said Wilco Stark, vice president for strategy and product planning at Daimler.
Daimler sees the sale of its electric vehicles contributing nearly 15%-20% of its overall sales by 2025 with an additional 10% sales coming from hybrids, said Stark.
Electric cars currently make up less than 2% globally. If the pace of its adoption accelerates, it will have a material impact on the reduction of pollution levels from the oil refining business.
“Technology is moving fast. In 10-15 years… our gasoline market might not be the same as it is today,” said Dawood Nassif, a board director of Bahrain Petroleum Company (BAPCO).
Moody’s has disclosed that given the fast pace of technological development in this area, making accurate predictions are very difficult. In the same breath, it has also warned of financial impact on oil companies and those down the line of its supply chain, stemming from falling demand for oil.
“The choices made by China and India are obviously most relevant for the possible future peak in passenger car oil demand,” said IEA’s spokesman.
And it’s not just India and China, the biggest carmakers of Asia, Japan and South Korea, have already begun selling significant numbers of hybrid vehicles.
Despite these emerging trends, refiners are confident of a strong demand for oil from heavy industries.
“Refiners may shift their focus from gasoline to middle distillates,” said KY Lin of Taiwan’s Formosa Petrochemical, a major Asian refiner.
“Gasoil is used widely, including in farming/industrial equipment… and also as a marine fuel.”