Higher supplies to the UK lift Swiss October gold exports
Supplies from Switzerland to Britain in October reached the highest level since June 2021.
(The opinions expressed here are those of the author, John Kemp, a market analyst for Reuters)
Britain’s transition from petroleum to electricity in road transport is accelerating, albeit from a low base, and will start to have a significant impact on oil consumption towards the end of the decade.
Ultra-low emission vehicles (ULEVs) accounted for nearly 7% of all new cars registered in Britain during the first quarter of 2020, up from just over 2% in the same periods in 2019 and 2018.
ULEVs, mostly battery electric and plug-in hybrid electric vehicles with a smaller number using hydrogen fuel cells, emit less than 75 grammes of carbon dioxide from the tailpipe per kilometre travelled.
There are now almost 280,000 ultra-low emission cars registered, up from less than 100,000 three years ago
There are now almost 280,000 ultra-low emission cars registered, up from less than 100,000 three years ago (“Vehicle licensing statistics”, U.K. Department for Transport, June 30).
At the end of March, there were almost 110,000 battery electric cars and 155,000 plug-in hybrid electric cars, with small numbers using other ULEV technologies.
Policy support is gradually switching from hybrids to pure battery electric cars to maximise the reduction in tailpipe emissions (“Electric vehicles and infrastructure”, House of Commons, March 25).
In the past year, registrations of battery electric cars have overtaken hybrids for the first time, which should result in a further electrification of the fleet over the next few years.
Ultra-low emission cars of all types still make up less than 1% of the 32 million cars registered but the proportion has almost tripled in the last three years.
New registrations for ultra-low emission cars have been rising at an annual rate of 30-40% compared with growth of just 1-2% for all cars, which implies rapidly rising market penetration (tmsnrt.rs/3eNmf7E).
New technology products (motor cars, refrigerators, and televisions) and services (gas, electricity, telephones, water and sewerage) have tended to spread through a population following an S-shaped logistic curve.
The initial invention is often followed by decades of small-scale use and trial-and-error, before the technology rapidly diffuses on a much larger scale. Eventually the market becomes saturated, limiting further spreading.
Fitting S-curves to emerging new technologies is risky: some subsequently fail to reach take-off or are overtaken by rival technologies and end up reaching only a fraction of the potential number of users.
Estimating the diffusion rate that underlies the logistic curve is especially prone to error in the early years when the number of current users is very low and growth rates are volatile.
Fitting S-curves to emerging new technologies is risky: some subsequently fail to reach take-off or are overtaken by rival technologies
Nonetheless, there are good theoretical reasons to assume the transition to electric vehicles will follow a logistic curve, and the observed growth in ULEV market share in Britain does appear to fit a logistic curve.
If ultra-low emission cars diffuse through the population following the fitted logistic curve, they will account for about 25% of all new registrations by 2027, 50% by 2031 and 75% by 2035.
The implied transition to electric-powered vehicles is broadly consistent with the government’s stated ambition of ensuring at least 50%, and as much as 70%, of all new car sales are ultra-low emission vehicles by 2030.
The ambition was set out by the Department for Transport two years ago in a major strategy paper (“The Road to Zero: Next steps towards cleaner road transport and delivering our industrial strategy”, July 9, 2018).
The timetable for the transition is also consistent with the government’s announced plan to prohibit the sale of gasoline and diesel cars from 2040.
The ban on gasoline and diesel car sales could be brought forward to 2035 under proposals the government has published for consultation (“Decarbonising transport: setting the challenge”, U.K. Department for Transport, March 26, 2020).
Given the current trajectory of ultra-low emission vehicle sales, this timetable appears realistic, requiring only a modest amount of policy intervention to force the transition.
Even if ultra-low emission cars reach 50% of all new registrations by 2031, their share of the total fleet will still be much lower because of the number of older vehicles still in use.
But there is still likely to be a small, significant oil consumption by the end of the decade, becoming much larger and more significant by the end of the 2030s, given the turnover in the vehicle fleet.
The transition is likely typical for a range of other high-income countries in Europe, which will have a big impact in aggregate
Britain’s oil consumption represents a very small and diminishing share of the world total, just 1.5%, so the implied transition from petroleum to electric cars is too small to matter on a global scale.
But the transition is likely typical for a range of other high-income countries in Europe, which will have a big impact in aggregate.
More important is whether the big three petroleum markets (China, the United States and India) see a similar shift towards electric vehicles over the next two decades.
China is likely to electrify road transport at least as fast as Britain, given its limited domestic oil production and dependence on imports, which policymakers have identified as a top strategic vulnerability.
Beijing has made the production and diffusion of electric vehicles a priority on both national security and environmental grounds to reduce oil imports and greenhouse gas emissions.
The transition in the United States remains more uncertain, given the country’s large domestic oil production and political disagreements over energy policy.
Future Democratic administrations are likely to accelerate the uptake of electric vehicles while future Republican administrations may offer less policy support.
India, which is the smallest but fastest growing of the big three petroleum markets, seems more likely to follow China given its similar dependence on imported oil.
For petroleum producers, including OPEC, the international oil majors and U.S. shale firms, the transition to electric vehicles is unlikely to have a significant impact on consumption and prices in the next five years (2021-2025).
But the transition will emerge as a small but significant factor in petroleum markets over the five-to-10 year time frame (2026-2030) and a decisive factor in the following decade (2031-2040).
(Editing by Emelia Sithole-Matarise)
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