Peak Gasoline Demand Looming as Engine Efficiencies Grow

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Posted by Joseph Keefe

Global gasoline demand to peak in 2021 -
WoodMac.

Demand for gasoline in the United States, which accounts for a
tenth of global oil consumption, is expected to peak next year as
engines become more efficient, WoodMackenzie analysts said.

Global demand for gasoline, which accounts for more than a
quarter of the world's oil consumption, is set to peak as early
as 2021 even in the face of relentless growth in the vehicle
fleet, according to the Edinburgh-based consultancy.

A rise in the number of hybrid and electric cars such as the
Nissan Leaf, Toyota Prius and Tesla as well as tighter fuel
standards in Europe and the United States will contribute to a
historic shift in consumption.

The United States saw spectacular growth in gasoline demand
following the collapse in oil prices in 2014 and as its economy
recovered from the 2008 financial crisis, reaching a record high
of 9.326 million barrels per day (bpd) last year.

Gasoline demand is expected to grow to peak of around 9.45
million bpd in 2017 and remain largely unchanged in 2018 before
slipping to 9.28 million bpd in the following year, according to
WoodMac.

"We expect gasoline engine efficiency to continue to improve
through better deployment of batteries in hybrid vehicles,"
WoodMac analyst Alan Gelder said.

An expected recovery in oil prices in coming years is also
expected to curtail demand growth, he added.

At its peak, global gasoline demand is expected to reach 25.89
million barrels per day (bpd) in 2021, accounting for roughly a
quarter of oil demand.

The decline in U.S. and European gasoline consumption will mask a
steady expansion in demand in Asia, where most of the global
increase in the vehicle fleet will take place.

While engine efficiencies increase, the global gasoline car fleet
is expected to grow by more than 10 percent by 2025 to above 1
billion vehicles, according to WoodMac.

Vitol, the world's top oil trader, last month said it expected
global demand for gasoline and diesel to peak in 2027-2028.

NO PEAK

The question of when oil demand will reach its apex has been one
of the most central and divisive for the industry, which faces
the prospect of a world almost free of fossil fuels by the end of
the century if a U.N.-backed plan to stem global warming is
enforced.

Some companies, including Royal Dutch Shell, the world's
second-largest oil and gas company, say oil demand could peak in
the 2030s. The International Energy Agency, the West's energy
watchdog, expects oil consumption to grow in the foreseeable
future, albeit at much slower rates.

"We still see global oil demand growing but the role of
transportation shrinks," Gelder said.

Growth will be driven by the petrochemical sector, which uses oil
feedstocks to produce plastics, as well as demand for diesel and
gasoil from the commercial transportation sector, particularly
buses, ships and planes, he added.

The world's car fleet, including diesel cars and trucks, is set
to grow by some 20 percent to 1.32 billion by 2025, according to
WoodMac.

But the pace is expected to drop sharply compared to historic
rates.

"Traditionally we had (annual) oil demand growth north of 1
million barrels per day. We are transitioning over the next
decade to growth of around 500,000 bpd a year," Gelder said.

Reporting by Ron Bousso

Mar 3, 2017

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