Oil demand to halve as we switch to electric cars

Demand for oil in New Zealand could almost halve in the next 20 years because of more efficient cars, electric vehicles and the use of biofuels, an energy report says.

The Ministry of Economic Development energy outlook report finds if there is high uptake of alternatives, oil demand would drop by 40 per cent.

At an oil price of US$180 ($250) per barrel and emissions price of $100 a tonne, petrol pump prices in real terms are more than $3.50 a litre in the 2030 scenario.

"At such prices motorists are expected to dampen their travel demand, use public transport options, where these are available in metropolitan areas, and increasingly move to smaller and more fuel efficient vehicles," the report says.

Vehicle efficiency gains result from engine improvements, such as the use of direct petrol injection, turbochargers, advanced transmissions, stop-start technology, improvements in tyre performance, lighter vehicles and increased use of hybrid and other advanced technologies.

Greater demand for light diesel vehicles is expected to grow by 30 per cent by 2025.

Heavy vehicle fleets are expected to carry more than double the road freight in spite of a greater share of the growth moving to rail and sea.

The higher oil prices also allow greater scope for alternative fuels and vehicles to be developed and become cost-competitive with petroleum products.

The two major developments included in this scenario are electric vehicles and increased use of biofuels.

Last year many of the world's major carmakers confirmed plans for the production of both full electric vehicles and plug-in hybrid electric vehicles.

These are expected to start appearing from late 2010 and their initial uptake will be bolstered by a range of incentives being offered by governments throughout the OECD.

Initially it is likely that the supply of these vehicles into New Zealand will be limited and purchase prices will be high, the report says.

However, it is expected that by 2020, these vehicles will be widely available, relatively economic and become a popular option for light cars in urban centres and also for light commercial vehicles and small delivery trucks.

The impact of electric vehicles on electricity demand is minor.

Even with 35 per cent of the light fleet being electric, electricity demand is expected to be only 5 per cent higher by 2040.

Although the impact of electric vehicle recharging on electricity energy demand is minor, it still requires more generation capacity to be built.

The mix of new baseload and peaking plant needed to meet this demand will depend on the daily pattern of electric vehicle charging.

Increased electricity demand also affects wholesale electricity prices which could climb between 3 per cent and 5 per cent.