Will EVs reduce oil demand?

[dan_s]

Below are comments from Wells Fargo Equity Research. From report dated 9-29-2017

Key Takeaway. We believe global oil demand growth will remain
solid for the next 5-10 years even as electric vehicles (EVs)
achieve market share inroads into the global auto fleet. In the
near to intermediate-terms, the current technological, operational and
infrastructure shortcomings and higher purchase prices for EVs are real
impediments to widespread adoption, in our view. Thus we expect
continued demand growth for oil and oil products well into the 2020s
and likely beyond based on continued use of conventionally powered
vehicles, underlying global demographics and economic advancements
in the non-OECD countries. By the latter half of the next decade the
combination of proactive, mandated emissions reductions and
technological advancements should deliver a fuller spectrum of cost competitive
EVs and may support an evolutionary change in vehicle
choices. That combined with considerably more fuel efficient and
environmentally friendly internal combustion engine vehicles (ICEVs)
may retard incremental gasoline demand growth, but not overall oil
demand growth within 10-15 years. Across the 1-5 year investment
horizon that we generally operate within, we anticipate global oil
demand growth of approximately 1.5% per year supported by global
gasoline demand growth. Autonomous vehicles (AVs) if/when they
become available could deliver the revolutionary event that
significantly reduces the cost per mile/trip, changes driving habits and
lowers oil consumption, and significantly curtail emissions.

 Demographics Favor Oil Demand Growth. Global population growth
and higher per capita oil consumption should underpin increasing oil
demand through the next decade and likely beyond. Oil prices and
policy mandates remain the two wildcards.

 EVs Require Policy, Regulatory and Financial Support. Today, EVs
struggle to compete on price, performance and flexibility with ICEVs.
These conditions may change over time. However, in the countries
where purchase and/or operating subsidies have been severely
curtailed or eliminated, EV sales have collapsed, reflecting the current
disadvantages.

 Biofuels Are the Larger Near-term Threat. Based on the IEA’s
forecast to 2022, biofuels (ethanol, biodiesel) should increase fuel
supply by 0.45mmbopd. Demand loss to EVs is expected to total just
0.2mmbopd, or less than one-half of the impact of biofuels. On a
combined basis, this represents a loss of oil demand of 0.65mmbopd,
or less than 1% of global fuel demand.

 Sustained Lower Oil Prices May Support Modestly Faster
Demand Growth. Since the oil price collapse began in late-2014, the
oil demand growth rate has exceeded 1.5% in 7 of 10 quarters. While
this performance may prove transitory, Economics 101 supports
greater demand from lower prices. In the US, increased driving and a
consumer preference for larger, less fuel-efficient vehicles has been a
direct consequence of lower retail fuel prices.