About 500 million cars were added to the global car fleet between 2000 and 2017, 75% in developing economies — and 40% in China alone, according to the IEA’s 2018 World Energy Outlook. Today, there are 1.1 billion cars on the road, and the fleet is expected to grow a whopping 80% by 2040. Much of that growth will take place in India, China and other developing economies. There are what I call the “big three” policies that countries are implementing (or planning to implement in the next few years): fuel economy standards, biofuels/low carbon fuels mandates and various EV support policies. Some countries are also looking to increase natural gas usage in passenger or light-duty vehicles (LDVs).
The single largest factor moderating oil demand in cars, as the figure below shows, are fuel economy targets, avoiding about 9 million barrels per day (mb/d) of oil demand in 2040. Biofuels offset 2.5 mb/d of oil demand in 2040 while natural gas offsets 1.6 mb/d oil demand. The 300 million electric cars on the road in 2040 displace around 3.3 mb/d of oil demand. The figure shows that even with these measures in place, demand will be about the same in 2040 as it was in 2017. The top right chart shows that even in 2040, there will still be some ways to go in setting fuel economy standards. The most fuel efficient vehicles today roughly meet a 6-8 l/100 km standard, and about 60% of vehicles in 2040 will not meet that standard. In other words, a lot is happening in fuel economy policy, but a lot more needs to happen.
What about heavy-duty vehicles (HDVs)? IEA notes that trucks have been one of the main sources of oil consumption growth in recent years, with demand up by around 4 mb/d between 2000 and 2017. Again, the vast majority of this increase has come from developing economies, and 25% from China alone. Today trucks are the second-largest oil-consuming sector after cars, with total consumption in 2017 of almost 16 mb/d. Global road freight activity grows by 3.1% per year, with China, India and the United States accounting for nearly half of the increase. In contrast to the outlook for cars, oil demand in trucks grows by 4 mb/d in the period to 2040 and is a key source of total oil demand growth in the New Policies Scenario.
This increase would be much larger were it not for improvements in vehicle and logistics efficiency, reflected in the bottom figure above. These bring a major divergence in trends between freight activity on the one hand and oil demand on the other. For example, in advanced economies, freight activity grows by 2.1% on average each year, yet oil demand falls annually by 0.5%. The use of biofuels for trucks avoids 1.2 mb/d of oil demand in 2040, natural gas (especially in the U.S. and China) displaces more than 1.1 mb/d of oil demand, while electric trucks avoid 0.6 mb/d.
The upshot: road transport remains a major consumer of oil through to 2040 and beyond but it is no longer a primary cause of demand growth, according to IEA. One reason is the rise in electrification and the digitalization of mobility services. But the more significant factor is the increase in vehicle and logistics efficiency for both cars and trucks. In total, these avoid almost 15 mb/d additional oil demand in 2040. While many of these efficiency improvements do not depend on major technological breakthroughs, they are contingent on continued policies supporting fuel economy and emissions standards. “In this area, as in others, government actions will be pivotal in determining the pathway that the world follows,” IEA says. And as Future Fuel Outlook members know, governments around the world have already been active in this area, setting LDV and increasingly, HDV standards.
Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy. The Future Fuels Outlook service provides market and policy intelligence and analysis on global future fuels issue and trends. Learn more and sign up here.
 The New Policies Scenario (NPS) is IEA’s main case, modeling current and announced energy policies, including those in the Paris Agreement.