The Impact Of Rising Electric Car Adoption On Crude Oil Demand

As electric cars gain popularity, many are wondering how this will affect the demand for crude oil. This blog delves into the relationship between these two factors and what it could mean for the future of energy.

For many years, the world has synonymized Middle Eastern nations with crude oil. These countries have been instrumental in shaping the world’s energy economy and continue to play a vital role in global oil politics. Statistics show that in 2021, the UAE produced around 3.7 million barrels of crude oil daily.

However, with the rise of electric car adoption, the love between oil and cars is losing its spark. The oil demand has decreased significantly compared to the previous year due to the rising trend of electric car adoption.

Although crude oil still constitutes the primary source of national revenue and domestic fuel of all middle east countries, ideas like economic and energy diversification, clean transportation technologies, and renewable energy are now driving new economic agendas in some oil-rich middle east countries.

Being the 2nd largest destination for preowned cars and the 7th largest exporter of crude oil, the UAE is becoming an early adopter of EV vehicles, promoting itself as a nation committed to a low-carbon and sustainable economy. The Emirati government also aims to boost EV use by 20% in 2023 and roll out 42,000 EVs nationwide by 2030. Whether buying a second car in Dubai or buying a new one, you must understand the UAE’s current oil market trends.

So what does it mean to traditional vehicle resources such as oil? Will the rising demand for electric cars hit the crude oil market? Here is a comprehensive analysis for used car owners of recent trends in the electric car industry in the UAE and its impact on the natural oil market.

How fast are electric cars growing in the UAE?

Analysis of the Electric Vehicle Market by Vehicle Types

Compared to 2021, sales of new electric vehicles doubled in 2022, with an increase of 51.8%. This amounted to about 5% of global passenger car sales of all types in 2021. There is no doubt that UAE is a hub for second-hand cars, but its electric car market is the fastest-growing and most lucrative market in the world and will continue to remain popular in the future.

As many developments are happening in the sector, there will be constant growth in the Electric Vehicles (EV) market despite the COVID-19 pandemic, resulting in supply chain bottlenecks.

Recently, the Rochester Institute of Technology (RIT) in Dubai signed a binding agreement with ONE MOTO to boost the use of electric motorbikes in the logistics & delivery markets of the UAE. One Moto manufactures electric vehicles that offer a fleet of cars like electric bikes, motorcycles, delivery and grocery vans, and scooters, catering to the urban commuters and last-mile industry.

Additionally, the M Glory Holding Group introduced a new $408 million electric vehicle manufacturing unit intending to produce 55,000 EVs a year, owing to the growing demand for green mobility in the UAE. This manufacturer is anticipated to dominate the market in the near future as it focuses on innovation. The industry is a pivotal part of the Middle East Electric Vehicle Market.

Even if there are several challenges, like rising production costs due and increasing raw material prices, EV sales are still multiplying. If this trend continues, EV cars are set to surpass the sales of vehicles with internal combustion engines or conventionally propelled cars.

How are EVs impacting the oil & gasoline market?

UAE Electric Vehicle Market Overview

The growing popularity of EVs is forecast to diminish the oil demand in the coming years. The shift toward sustainability is a key driver for increased EV sales globally. This market phenomenon is also likely to result in an energy transition soon. However, 76% of surveyed O&G executives suggest that a rise in oil prices is also projected to accelerate the energy transition.

As a result, leading economies have set ambitious targets for electric vehicles. For instance, many countries are looking to increase the share of electric vehicles in new car sales to 50% by the end of 2030, which can lead to a drop of around 34% in crude oil demand over the same period.

Is the demand for oil and gasoline reducing?

With battery prices falling by 35% and oil pricing touching the sky, the emerging trend of electric cars is clearly going to hit the crude oil market hard. According to the projections, long-range electric cars will cost less than $22,000 by 2040, and 35% of new vehicles will have a plug. However, it doesn’t mean the demand for petrol or diesel cars will decrease in the coming years.

When electric vehicle sales increase, the amount of oil displaced by them varies. If the demand for electric cars continues to increase at the same pace as today, oil displacements will reach 2 million barrels daily. However, predictions like these can be tricky and vary according to the market condition. The best we can do is to be more accurate than conventional wisdom.

Factors that may still drive the growth in oil demand

EVs will continue to grow in the UAE market. It’s only a matter of time before we reach the point where we will see more EVs on the roads than ICE vehicles. Rising fuel prices also seem to have gotten more people to look at and buy electric cars.

However, that doesn’t mean increasing electric car adoption will hit the crude power of black gold.

Despite all the above factors and trends, oil and gasoline companies will likely keep evolving. Electric cars are still not a silver bullet for cutting oil use.

Even if the demand for electric cars is increasing in the UAE due to high petrol and diesel prices, there is still scope for O&G companies to repurpose their existing assets and help them grow during the EV transition. Also, people still prefer to buy used cars in the UAE, including petrol and diesel vehicles, which maintain the demand for crude oil.

Here are a few opportunities that can help these companies thrive.

• Using their vast networks and information to capture market share
• Repurposing or reevaluating equipment to explore and identify raw materials

Follow us at Cars24 if you want to put your used car for sale in the Sharjah car market or learn more about the upheavals in the oil market and trends in the EV automotive sector! Cars24 is a fully-certified marketplace in the UAE that helps you at every step of the used car-buying and selling process.

Crude oil is the dominant energy source and the heart of all economic growth and activities. All the major industries, including air transport, power industries, agriculture, housing, and automotive, depend on crude power.

So, even though the UAE government is pushing for adopting electric vehicles and setting aggressive adoption targets, it focuses on ¼ of the problem.

While the demand for oil in other industries is more likely to increase, we need to find alternatives and enforce faster adoption policies, for the demand for crude oil will peak in the next 20 years. Yet, even then, crude oil will remain a significant energy source for vehicles.

Follow us at Cars24 if you want to put your used car for sale in the Sharjah car market or learn more about the upheavals in the oil market and trends in the EV automotive sector! Cars24 is a fully-certified marketplace in the UAE that helps you at every step of the used car-buying and selling process.

FAQs

Is it worth buying an EV car?

If you are looking for an electric car for your short daily commutes in the UAE, an EV is worth buying as it will reduce your commute costs in the long run. Additionally, the maintenance cost of an electric car is lesser than a conventional car. However, if you are always on long road trips or like to ride on highways, consider buying a petrol or diesel car as it offers excellent mileage compared to an EV car.

Are EV cars faster than petrol?

EV cars are often quicker than petrol or gasoline vehicles but not consistently faster. It means they can go from 30 to 50 mph far more quickly. However, the top speed of an EV car is always lower than petrol or gasoline.

Who is the largest EV car seller in the UAE?

In 2022, BYD overtook Tesla as the UAE’s largest electric vehicle brand or seller. While BYD sold just under 1.85 million plug-in electric vehicles globally, Tesla reported some 1.31 million sales. Based on the current sales, BYD is also the leading manufacturer of electric cars in China and other countries.