EV boom — oil vehicles on their way out? – Newspaper

The Organisation for Economic Co-operation and Development’s (OECD) energy watchdog, the International Energy Agency (IEA), is on a warpath with the Organisation of Petroleum Exporting Countries (OPEC) and senior Republican lawmakers in the United States (US).

For the last few years, the IEA has been insisting that the green revolution is around the corner and that global oil demand could peak over the next few years — by 2030. This is worrying to the oil industry, as its future is now at stake.

Lobbying at Capitol Hill thus went into overdrive, and the Agency is now under pressure from US Republican lawmakers — regarded as close to the oil industry — over its oil demand forecasts and scenarios.

In a letter dated March 20, senior US Republican lawmakers have attacked the IEA under the leadership of its Executive Director Fatih Birol, regarded by many as the guru of the energy world, accusing it of becoming an energy transition cheerleader.

IEA report urges a green revolution is around the corner as EV evolution sweeps across global auto industry

“We would argue that in recent years, the IEA has been undermining energy security by discouraging sufficient investment in energy supplies — specifically, oil, natural gas, and coal,” the letter addressed to Mr Birol said. One of the basic reasons behind the formation of the IEA was to ensure the energy security of the industrialised world in challenging times.

The letter also called on Mr Birol to detail the US funding the IEA has received over the last 10 years.

In its response dated April 5, addressed to the lawmakers, the IEA insisted it was committed to a secure, affordable, and sustainable energy future for all. “This is our guiding mission and stands at the core of our mandate as an inter-governmental organisation.” Though, it continues to insist the energy world is undergoing a major metamorphosis.

The global elective vehicle (EV) revolution — including battery electric vehicles and plug-in hybrid vehicles — is gearing up “for a new phase of growth”, the IEA reiterated in its recently released ‘Global Electric Vehicle Outlook’ report.

The report said global EV sales are set to rise by more than a fifth, reaching 17 million this year. The pace of electric vehicle uptake will mean that oil demand for road transport should peak around 2025.

Globally, oil is mostly used in the transportation sector. As per estimates, this sector consumes 60 – 70 per cent of the total global energy consumption. However, one needs to point out here that the increasing demand for petrochemicals could somewhat replace the depleting oil demand in the transportation sector. Yet, it may not completely plug the growing gap.

The report goes on to add, that the “surging demand” for EVs over the next decade was set “to remake the global auto industry and significantly reduce oil consumption for road transport”. Its projection said half of all cars sold globally by 2035 are to be electric, up from more than one in five this year, provided charging infrastructure keeps pace.

As per the IEA report, some 17m battery EVs and plug-in hybrids will be sold in 2024, up more than 20pc compared with 2023

The Agency’s bullish long-term outlook for EVs based on current government policies comes despite Tesla, the world’s biggest battery EV maker, expressing some pessimism in recent months about the industry’s future by slashing its prices in major markets to counter declining sales and growing competition from Chinese startups and established carmakers.

Today, “China is the de facto leader of electric car manufacturing around the world,” Mr Birol said. In 2023, Chinese carmakers accounted for more than half of global electric car sales, compared with their 10pc share of the conventional car market.

By 2030, almost one in threecars on the roads in China is set to be electric, up from fewer than one in the past 10 years, according to the IEA. That compares with its forecast for 17pc in the US and 18pc in the European Union, compared with just over 2pc and almost 4pc respectively last year.

The growth is not driven just by Chinese buyers. The number of new battery electric cars sold in the European Union rose almost 4pc in the first quarter of this year compared with the same period in 2023, says the European Automobile Manufacturers’ Association.

As per the IEA report, some 17m battery electric vehicles and plug-in hybrid electric vehicles will be sold in 2024, up more than 20pc compared with 2023.

It seems the IEA has not backed off yet from its projections of a changing energy horizon. However, how long Fatih Birol and his team can continue with independent projections remains to be seen. With Washington contributing most to the IEA purse, it may not be easy for Mr Birol to pursue its independent outlook for long.

With the EV revolution around the corner, where Pakistan stands on the issue remains a big question. The country needs to move ahead rapidly. The growing pollution in Pakistan’s major cities, the ever-increasing dollar outflow from importing oil, and the changing climate in the form of unexpected, torrid rains and flash floods all indicate the urgent need to transition to a green energy future as soon as possible. Are we ready? The answer seems a flat no.

Published in Dawn, The Business and Finance Weekly, May 6th, 2024