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Introduction of electric cars likely to reduce gasoline demand

| | Dec 01, 2016, at 10:04 pm
Calgary, Dec 1 (IBNS): The International Energy Agency believes that the demand for gasoline is now on a downward spiral and may even flatten over the next 25 years, according to media reports.

Calgary Herald reported that Fatih Birol, Executive Director of IEA, in a recent interview in London, said that electric car production rate is expected to multiply from little more than one million last year to 150 million in 2040.

The International Energy Agency said that with the introduction of fuel efficient vehicles and electric cars in the market by companies like Tesla Inc., the demand for liquid gold could wane.

That shift would have a profound impact on the oil refining industry, because gasoline accounted for one in four barrels consumed worldwide.

The ongoing fall in demand of gasoline in recent days showed how rapidly the oil market scenario has been changing, casting a shadow over the future of the oil industry, which until recent past had been booming with production and had been accelerating towards decades of growth ahead.

Royal Dutch Shell Plc. the second largest oil company in the world in terms of market value, recently said that overall oil demand could peak in as little as five years.

While IEA did not subscribe to the pessimistic assessment of Royal Dutch Shell, it said that overall oil demand would grow for several decades because of higher consumption of diesel, gasoline and jet fuel, by the trucking, shipping aviation and  petrochemical industry.

Not agreeing with the view of IEA, Phillip Verleger a veteran oil market analyst in Colorado said that IEA's outlook seemed too optimistic and overall consumption of oil would begin to drop not in 2030 but probably from 2020.

The projections were part of the overall forecast by the Paris-based IEA's World Energy Outlook 2016.

According to their forecast, gasoline demand would fall from 23 million barrels a day last year to 22.8 barrels a day in 2020.

There was a growing demand for gasoline particularly in the US because of a decline in price. But with the rise of price, a change in the demand pattern is likely and consumers would go for fuel economy cars again.

Looking at the trend, key players in the automobile industry, such as GM, Ford, BMW AG, Nissan, Toyota and of course Tesla have been investing heavily on electric vehicles, and with the development, battery prices are gradually receding.

Now, if, by 2040, consumption of gasoline dropped as anticipated by the IEA , the refineries would likely be the biggest victim as they have spent billions of dollar to maximize gasoline production over the past two decades at the expense of other fuels.

Alternatively, it would be an act of prudence if refineries would target diesel in lieu of gasoline as that is a utility fuel and has an expandable market.

(Reporting by Chandan Som)

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