Oil Shocks Could Accelerate EV Adoption, WoodMac Says

Oil supply disruptions, high fuel prices and faster battery innovation could accelerate electric vehicle (EV) adoption, according to Wood Mackenzie's new report. The report cites wars affecting oil-producing Russia and Iran as creating higher fuel prices and supply risks, providing an incentive for governments and consumers to invest in EV manufacturing and supply chains.

China is making strides in EV technology, including five-minute charging, sodium-ion and lithium iron phosphate batteries. Western governments may need to boost support for domestic EV technology or license more Chinese technology to keep pace and lower exposure to oil-price shocks. Wood Mackenzie estimates global oil consumption could drop to 99 million barrels per day by 2040, down from over 100 million bpd today.

The shift will not be uniform across the globe. The United States, despite being the world's largest oil producer, is projected to see its EV market share grow from 3% today to 20% by 2040. Europe, which relies heavily on imported oil, could witness its EV share rise from 3% in 2025 to 35% by 2040.

David Brown, an author of the report, believes that EV innovation beyond the United States could compel Washington to prioritize transport electrification to maintain competitiveness at home and abroad. The industry needs an additional $45 billion in metals investment over the next decade to support a 50% increase in global EV volumes by 2040. Copper is expected to be the biggest constraint.

Utilities and regulators will face the challenge of accommodating more EVs on already-stressed power systems. They will need to implement managed charging, scheduling vehicle charging during periods of surplus electricity supply.