Self-Driving Cars To Shrink Oil Demand

Almost every major auto manufacturer has stepped into the self-driving car industry. New projects have been announced and trials on public roads have been conducted by them. Along with testing autonomous cars for ride-hailing services, they have been tested for pizza delivery service. Governments have been supporting these projects and making changes in regulations to promote the development of autonomous vehicles. Chinese governments have been giving concessions in taxes to local firms. So foreign firms have collaborated with local manufacturers to avail those benefits. In addition, the reduction of greenhouse gas emissions is a prime focus of governments to promote such projects.

The advent of electric vehicles will help in keeping carbon emission at lower level, but it offers a threat to oil producing companies. Many electric vehicle projects are in developmental stages. As the technology progresses, these vehicles will become omnipresent. People will opt for electric cars and travel sharing due to their environment friendliness as well as affordability. This would jeopardize profits of oil companies as consumption would reduce considerably.

BP, an oil and gas company outlined that availability of autonomous cars and acceptance of travel sharing will reduce oil consumption significantly by 2040. In its forecasts, the company also highlighted that there will be a time when people will prefer travelling in share trips instead of private cars. In addition, there would be 100-fold increase in electric vehicles by 2040. The travel demand would grow by more than double in countries such as India and China.

BP Energy Outlooks focused on determining share of electric cars in a car fleet from past few years. This year, it focused on car kilometers powered by electricity. Considering policies and technologies continue to evolve at the same rate, it is found that 30 percent of car kilometers will be powered by electricity by 2040. By the same time, the number of electric vehicles would reach over 320 million by 2040 as compared to 3 million today. The rise of shared car mobility would make a huge difference between large number of electric cars and kilometers powered by electricity.

BP also stated that the fuel demand would be lowered to 18.6 million barrels per day by 2040 from 18.7 million barrels per day in 2016. The company stated that there will be electric cars running on the roads by 2020. However, they have high initial costs, so majority of cars will be purchased by fleets that offer shared mobility services. Chief economist of BP Spencer Dale said, “What we expect to see in the 2030s is a huge growth in shared mobility autonomous cars … Once you don’t have to pay for a driver, the cost of taking one of those share mobility fleets services will fall by about 40 or 50 percent.”

Leading tech giants have been cashing in billions into the autonomous car projects to get the first-mover advantage. General Motors, Google’s Waymo, and Uber Technologies have been moving forward rapidly in terms of development and testing. As the electric vehicles become ubiquitous, the demand for oil consumption will reduce. It is interesting to see if there will be new ways to offset the reduction in demand.