TOKYO -- As the global shift toward electric vehicles gathers momentum, some analysts are forecasting a faster-than-expected drop in demand for oil. Others, however, are not so sure.
France and Britain plan to ban sales of gasoline- and diesel-fueled cars by 2040, while China will require automakers to produce electric vehicles at a set ratio of their output. India has also kicked off its drive to electric, with major automakers starting to boost production of the vehicles.
At a September commodity-related event in Singapore held by Britain's Financial Times daily, an expert noted that peak oil demand will be moved to the 2020s, earlier than previous projections of the 2030s and 2040s.
The Institute of Energy Economics, Japan has outlined a scenario for oil demand if electric vehicles advance as planned by governments. Assuming that the ratio of electric vehicles and other eco-friendly cars to total 30% of global new car sales in 2030, 66% in 2040 and 100% in 2050, demand for oil will peak around 2030 and slowly decline thereafter, the IEEJ said.
Automobile fuel accounts for more than 40% of petroleum product consumption, according to the IEEJ. The estimates by the Tokyo-based think tank seem to support views predicting the early arrival of peak oil demand.
However, IEEJ senior economist Akira Yanagisawa claimed, "The possibility of electric vehicles becoming as widespread as planned is low."
There are many hurdles to clear before electrics become a dominant form of transportation. Improving infrastructure is one of them.
While China and India hold the key to infrastructure improvement, "The electricity supply will be a big bottleneck that prevents electric vehicles from becoming prevalent," said Nomura Securities senior economist Tatsufumi Okoshi,
Even if electric cars replace all cars in Britain and France, both of which possess advanced infrastructure, crude oil consumption will not be greatly affected.
There also are problems related to tax, subsidies and other systems. Japan, the U.S. and many European countries tax auto fuel, using the revenue to finance road maintenance and public services.
"If the shift to electric vehicles advances, how to obtain alternative sources of revenue will become an unavoidable issue," said Naohiro Niimura of Tokyo-based research and consulting firm Market Risk Advisory.
China has been promoting use of green cars with large subsidies to address acute air pollution, but will cut them starting this year. According to the International Energy Agency, the country is already the largest electric vehicle market, with cumulative sales through 2016 -- including plug-in hybrid vehicles -- of 650,000 units, surpassing the U.S.
In order to continue pushing electrics in the face of reduced subsidies, the cost of batteries, which account for roughly 40% of a vehicle's cost, must be lowered. But this may prove difficult as the price of rare metals used in batteries continues to rise due to increased demand.
Energy conservation efforts have sent crude oil consumption, per global gross domestic product, falling since the 1970s, Okoshi noted. Over the past decade, it has dropped at an annual rate of 1.2%.
Still, total consumption is increasing. Even if energy conservation continues at its current pace, economic growth will push consumption up until at least 2040.
"Widespread use of electric vehicles is unlikely to move peak [oil] demand greatly forward in the absence of extraordinary technological innovations," Okoshi said.
The shift to eco-friendly electric vehicles will progress steadily to reduce reliance on oil. But technological advances unaccompanied by user-friendly features and economic efficiency eventually hit a snag.
Sensible measures that take into account the possibilities -- as well as the limitations -- of electric vehicles should be formulated to promote use of the vehicles. Otherwise, the world may be disappointed when it realizes just how far electric vehicles can go.