Peak gasoline

It’s pretty chart time again!

A natural follow-up to my very broad-brush survey of the global emissions trajectory is: when can we expect oil demand, one of the big components, to peak?

To a first approximation, oil is used for transport by land, sea and air. The biggest chunk is gasoline for cars and diesel for trucks. These are still growing, and will continue to do so for some time. So start with gasoline for cars. When will this peak? I have had a go.

Cars last about 20 years, and every year <4% of the growing fleet is scrapped. The annual net increase is linear, like total sales. When new electric cars pass the total annual net increase, the total stock of ICE cars will peak and start to fall.

The growth of electric car sales is very rapid and exponential, but it’s also uncertain. I took three scenarios: the 58% CAGR that fits the last five years of data, and more cautious lower rates of 25% and 40%. Sales of EVs will pass the net growth in the car fleet in 2026, 2030, and 2037 in the three scenarios: 10 to 20 years from now. If I had to guess a “peak ICE cars” year, I would go for 2032, 15 years ahead.

The total stock of ICE cars is a fair proxy for gasoline consumption. So the same years are possible peaks for that. The range is disappointingly wide, but it’s is not useless information for global emissions. If diesel tracks gasoline (I think it will), the overall peak in oil demand will come at the same time.

A net zero economy requires a complete ICE phaseout and not peak but zero gasoline and diesel. To get this by 2050, all new ICE sales would need to stop around 2035, a much tougher proposition. Still, we have seen with coal that once the rot really sets in, things speed up. Some markets - I fancy diesel buses - may collapse completely quite soon.

A lot could go wrong. But a lot could also go better. It’s a fat risk distribution.

High-fibre background and speculation below the jump. There is not yet enough sales data for commercial electric vehicles to allow even a guesstimate for the phaseout of the competing diesels; but I offer qualitative reasons for thinking that they will follow a similar trajectory.

The detail

The spreadsheet is here. I took data for car sales from OICA, the world association of automakers. They also have a solid-looking estimate of the total car fleet, from which I could calculate the net annual growth. Annual scrappage is a tad under 4% of the fleet, consistent with a mean vehicle life around 20 years allowing for past growth. Growth is obviously linear so I projected gross and net sales that way. There are downside uncertainties: global recession, an oil price spike, and the arrival of massive rideshare from self-driving cars. Still, poor people want the cars rich ones have, so the projection is a reasonable BAU scenario.

For electric cars, I used IEA data for PHEVs (battery-electric and plug-in hybrids, almost all cars plus a few light vans). Annual sales only passed 10,000 in 2011 so there are only 5 usable years to go on. The growth since then is clearly exponential.

This is a thin database for a projection. I took the sky-high historic trend of 58% annual CAGR, and more cautious ones of 25% and 40%. Sales of EVs will pass the net growth in the car fleet in 2026, 2030, and 2037 in the three scenarios. That is a wide range, but that’s compound interest for you. The explosive growth has been not only due to economies of scale and networking, which we can confidently expect to continue, but to technical progress in batteries, which will probably continue from the learning curve model, but with less certainty.

I used the total stock of ICE cars as as proxy for gasoline consumption, so this will peak with the ICE fleet. There are a few qualifications to this, in opposite directions.

Downsides: newer cars tend to do higher mileage than older ones, which brings the date forward a little; the second-hand value of ICE cars will fall, accelerating scrapping assuming scrap value stays constant.

Upside: the PHEV total includes hybrids, which have ICE range extenders, and therefore burn some gasoline. This offset will be limited by several factors: the modal daily trip in the USA  is about 15 miles, less in Europe, so even a modest all-electric range bites off the lion’s share of consumption; hybrid buyers have a strong incentive to pick a model with an electric range that matches their typical daily use; batteries will get better and cheaper, and the battery range of hybrids will increase. Above all, hybrids are clearly a complicated and expensive transitional technology that will fade out after another five years or so.

These effects are swamped by the uncertainty over the CAGR. I propose to ignore both for now.

Diesel

I didn’t even try a parallel calculation for diesel. The sales of diesel cars are crashing, simply replaced by gasoline ones, which makes little difference to total CO2 emissions (though a lot for particulate and NOX pollution). Diesels are the engine of choice for any commercial vehicle larger than a light van. Will CVs go electric too?

In most segments of this market, there are hardly any EV offerings today. The picture is very mixed.
Buses:  competitive offerings exist from BYD, Proterra, Volvo, and several domestic Chinese manufacturers; electrics hold a fifth of the Chinese market, over 100,000 a year; fleet orders are starting elsewhere (London, North Holland, Long Beach).
Light vans:  Renault’s tiny Kangoo (the size of a small car) is successful in France; Nissan’s e-NV200 minivan is marking time; 3-tonne workhorse panel vans are being launched this autumn in Europe from Renault and VW (European small businesses use vans not pickups); Deutsche Post/DHL are making their own vans in Germany; UPS have invited bids for low-emission vans.
Special-purpose vehicles:  garbage trucks from specialist manufacturers are being trialled in Los Angeles and elsewhere; London’s taxis will go hybrid (it’s unclear whether the subsidiary of Chinese carmaker Geely that makes them will be able to sell the model elsewhere, as it’s designed to suit London’s combination of a special design requirement for black cabs plus the coming ULEV zone). There are plenty of other opportunities and niches here : look at the range of vehicles on any airport tarmac.
Medium trucks for regional distribution:  Daimler (parent of Mercedes) have demonstrated a 200-mile all-electric 26-tonne chassis, for a product launch “early in the next decade”; BYD have a range in China, and are rolling out US launches.
Long-distance heavy trucks (whose enormous mileage creates a disproportionate impact on overall fuel burn and emissions): Tesla have promised to demonstrate this autumn a concept for a long range semi tractor; in addition to Daimler, most of the key manufacturers (Volvo, Eaton, Cummins, MAN) are working on hybrid truck powertrains. All-electric heavy trucks would require nationwide networks of very heavy-duty chargers, at least the 350 KW being planned in Germany. This is quite feasible with a bit of coordination, but calls for substantial investment. I have no information on China.

It’s impossible to use this lively confusion as a basis for an extrapolation, so it’s back to qualitative reasoning.

Electric traction works just as well for heavy as light vehicles: the peak power-to-weight ratios are lower, though heavy trucks in particular run for long periods at high power. Many commercial fleet owners operate short, well-known and regular runs in and around cities, do not need long range, and do not care at all about performance (possibly to the chagrin of their young drivers). Pressure is growing for cities to tackle air pollution from diesels. The expected improvements in battery cost and power density will be just as available to trucks as to cars.

It’s a reasonable prediction that a full range of BEV and PHEV commercial vehicles will hit the market in the next 5 years and rapidly gain market share from diesels.

Once established, and assuming the growth rates are similar, electric commercial vehicles will replace the pool of ICE ones faster than cars. The reason is their much shorter life. The depreciation tables of the IRS  in the USA give an asset life of 8 years for buses, 4 for light commercial vehicles, and 6 for heavy trucks. That may be generous, but it’s informed. Many US transit operators run their buses for 12 years for regulatory reasons.  As a rule of thumb, the life of commercial vehicles is about half that of cars.

My unreasonable prediction is that the asset life factor, plus more stringent and targeted air pollution policies in cities, will outweigh the five-year delay in starting. So peak vehicle diesel will come even before peak gasoline.

So there you have it, my case for peak diesel and gasoline in land transport around 2032, with a very wide margin of error.

That would not be enough for a complete ICE phaseout by 2050, which is a precondition for a net zero economy and the 2 degree Paris cap. For that, all ICE sales would need to drop to zero around 2035. Still, we have seen with coal that transitions often speed up. A few years ago, renewables advocates were beginning to point out excitedly that wind was cheaper than new coal generation. Now its a commonplace that both wind and solar are typically cheaper than old coal plants, which are being shuttered faster than Trump can complain. The social license to operate a pollution-spewing vehicle of any sort may well evaporate. The support infrastructure of gas stations and repair shops will begin to fall apart. Manufacturers will quit the business early as a dead end, as happened with nuclear. Will there still be a market for new diesel buses in 2030? I doubt it very much.