In 2016, Bloomberg Made A Wild Prediction Regarding EVs For 2023. We’re Here To Check On It.

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The year is 2016. The Tesla Model 3 is still firmly in production hell and won’t be able to ramp up production for two more years. Volkswagen is announcing its MEB platform and high hopes are being placed on the ID lineup. BYD is just entering its new phase of development, and still relies on heavy, slow, ugly, yet sturdy and reliable EVs such as the BYD 5 and BYD 6.

EV sales worldwide are still minuscule: a fraction of a fraction. And yet, in February of that year, Bloomberg published an EV prediction that blew many minds … including mine. It predicted oil markets crashing because of EVs as early as 2023.

Well, we’re ending 2023 now, and believe it or not, I never forgot that short video. So, I tracked it down, and we’re here to check on it.

Bloomberg’s video: an overview

In case you haven’t seen it, you can check the video here. But in any case, I’ll summarize its main points.

As per Bloomberg, less than 0.1% of all vehicles were EVs in 2016, with OPEC claiming that even in 2040 they would make up less than 1% of all cars (yeah, you can laugh if you want). However, Bloomberg’s team was smarter than OPEC’s and assumed exponential growth for EV sales following the “S-Curve” so common for the adoption of new technologies. Further on, Bloomberg calculated that the oil crash in 2014 only required 2 million extra barrels a day of oil production, and thus concluded that once EVs reduce consumption in that same amount, a crash is nearly inevitable.

But how many EVs are needed for that? Bloomberg calculates 15 barrels of yearly oil demand reduction for every EV sold. Checking on this number, we find it a little optimistic, as it expects oil demand to be reduced by 630 gallons per year, per car. Assuming a 1/1 parity to gasoline*, that adds up to 30,000 km (18,640 miles) per year, a figure above even the US average, and even further above Europe’s or China’s. (*I use a 1/1 parity because even if only 40% or so of an oil barrel turns into gasoline, the rest of the oil still has other uses. If any of you readers has a point on why this shouldn’t be the case, I’ll be happy to read it.)

But still, sticking with Bloomberg’s calculations, if we are going to reduce oil consumption by 2 million barrels a day (730 million barrels a year), we need some 49 million EVs on the roads, something Bloomberg claims could be reached “as early as 2023.” So, how are we doing?

Checking on the prediction

Thanks to José Pontes, we have reasonable estimates for yearly sales that look more or less like this:

(As a side note, you can clearly see how the EV market crashed in 2023, as many media outlets claimed /s).

Adding up the data from 2016 to the 2023 estimates, we have some 40.4 million EVs, plus 1.3 million already on the roads in 2015, giving a total of 41.7 million EVs — 29.1 million of them being BEVs and 12.6 million PHEVs. To this, we must subtract cars that are no longer being used, but that number is hard to come by and shouldn’t be too big.

Depending on how PHEV owners use their vehicles, this means that we’re either almost at Bloomberg’s scenario (and meeting it in the second half of 2024 at the latest) or we’re still a year and some months away from it. This means that Bloomberg’s most optimistic prediction fell short, but it wasn’t far off. But then, how’s that oil crash going?

EVs and oil demand

I said before that I felt Bloomberg’s calculation of 15 barrels a year displaced per EV was far too optimistic, and data seems to back me up. According to our very own Zachary Shahan (from BloombergNEF data), EVs are already displacing 1.8 million barrels of oil, most of that due to two- and three-wheelers (mainly ebikes, electric scooters, and electric tuk-tuks) — cars, buses, and commercial vehicles only account for 800,000 barrels of demand reduction. I’ll stick to this second number, because we don’t know that electric bicycles are substituting a gas-powered personal vehicle: many times, they’re substituting walking, a normal bicycle, or public transportation (or at least that is my perspective from here).

800,000 barrels a day being displaced by some 40 million cars means that we will need to get to 100 million EVs before we get to the 2-million-barrel reduction Bloomberg talked about, something that we should see in three years at most. However, as other uses of oil are increasing (jet fuel will be the main source of demand growth in 2023 and 2024, even if still down compared to pre-pandemic levels), even more than that will be required. Cars are also being used for longer periods of time (the USA’s average car has never been older), but that’s likely been offset by a lower number of ICE sales, as it seems we hit “peak ICE” back in 2017.

Peak oil demand seems harder to come by. It’s clear that the 800,000 barrels per day of EV-related oil demand reduction in 2023 weren’t enough to trigger it, for the IEA calculates a 2.3-million-barrel rise in oil demand this year. World oil consumption will reach a historic high of 101.7 million barrels per day in 2023, completing the recovery from the significant reduction in oil demand due to the pandemic.

There is, however, a silver lining. Prior to COP28, OPEC+ announced oil production cuts to prop up the price … and yet, day after day, for seven weeks straight, oil prices fell. The markets, it seems, weren’t sure that cutting two million extra barrels of oil a day was enough to sustain prices at the $80 bracket. This is of course a very complex matter, but in summary, it seems there are two forces at play here: for one, the strength of non-OPEC producers (Guyana, the US, and Brazil in particular) who have been more than making up for these cuts; and for another, that the markets — it seems — no longer believe that oil demand will keep growing in the medium term.

The IEA already reduced demand growth for 2024 to only 1.1 million barrels per day. OPEC, of course, claims next year will be even worse than this (or better, for them), with 2.4 million barrels of growth per day, but I don’t think many people are taking that forecast seriously (remember that 1% EVs in 2040?). What’s interesting here is that most analysts I’ve read only mention “economic headwinds” as the main cause of oil demand growth reduction, omitting EVs as a significant source for it. Nonetheless, it’s clear that China and the EU (the regions with the largest EV market share) are ones leading in this reduction.

Going beyond 2024 is problematic, but if the forecasts here on CleanTechnica hold, it may well be that demand for another million barrels of oil a day is subtracted via EVs by mid to late 2025. The trend will only accelerate after that, making it very hard for oil markets to remain bullish in the second half of this decade. OPEC+ seems to be betting on the developing world picking up the slack, but I bet cheap Chinese EVs will make sure that’s not the case.

We will keep needing oil for a while, of course, but it will be cheaper and easier to get, as we will use much less of it. That the overwhelming power of oil-producing governments will all but evaporate should be clear after what we saw last month, just 50 years after the Oil Embargo of 1973. Those 50 years may be remembered by future historians as the Oil Age. After all, we didn’t stop using stone in the Copper Age, did we?

As for Bloomberg, it very nearly got the number of EVs right, but it was over-optimistic in its calculations and got total oil displacement wrong. Still, we’re heading there. Only two to three more years: that’s my prediction.