I wonder if the global auto fleet has become more fuel efficient over the last 5 or so years. I'd like to think so, but larger SUV style vehicles have grown enormously in popularity, and diesel passenger car sales have plummeted. At least we're at the stage in the growth curve where EVs are beginning to make a big contribution to reducing fossil fuel needs.
I'd expect there are enough EVs coming on the market that this is shifting the compliance burden from fuel efficient ICE to EV. So this could allow what ICE remains on the market to have a less efficient mix in recent years. Indeed, fuel efficient ICE is no longer cross-subsidized under fleet standards, this could lead to an overall all reduction in the number of new ICE sold. So policy set at a time when there were practically no EV in the mix could be a little out of touch with the present situation.
That said, from the point of view of total fleet fuel consumption, the old ICE falling into disuse is around 20 years old. So replacements have the benefit of two decades worth of efficiency gains. My analysis of global vehicles in use from 2005 to 2015 (before EVs had much of an impact) suggest that the generational (roughly 20 year) shift had a 43% gain in MPG, and that was inspite of consumer trends performing bigger vehicles.
So while I concede that year over year efficiency gains in new ICE could level off, the generation efficiency gains still impact the total ICE fleet in use and will continue to do so as EVs disrupt the new auto market. 2022 very well could be the peak for ICE vehicles in use. So even with no generational efficiency gains going forward, aggregate demand for motor fuels is likely to decline. So going forward whatever generational efficiency gains remain only intensifies the decline in motor fuel consumption.
Additionally, EVs are close to forcing a permanent decline in motor fuel consumption. My own analysis suggests that by 2025, BEV market share hits 27% and PHEVs could claim another 10%. EV growth beyond this point forces significant fuel displacement. So in view is that setting a new ATH for oil consumption in 2025 or later years has very low probability. Moreover economic headwinds suggest that oil will not set a new ATH this year, 2022. So 2023 and 2024 remain as the last best chances for the oil industry to post a peak higher than 2019.
The oil industry, however, does not appear to want to risk oversupplying the market just to hit a new high score. They'd rather suck maximal profit out of what remains of peak oil demand. We'll see how it plays out, but the oil industry has very little financial incentive to risk collapsing the price of oil.
Indeed, 2018 could stand a the peak year for the production of crude and condensate and 2019 for the peak production of oil (crude, condensate and natural gas liquids). If this holds, 2019 will also likely hold as the peak year for oil consumption. Increasingly, the distinction between peak consumption and peak production is becoming irrelevant. Oil has peaked in 2019.