Oil Demand to Drop 50% in Transport by 2050, Report Says

Demand for oil-based transportation fuels will be cut in half by 2050, Norway-based DNV said in its “Transport in Transition” report released on May 4.

Fossil fuels’ grip on the road transport market will tumble from 91% today to 57% by 2050, the report said. Oil consumption in aviation will remain flat over the next 27 years, but the maritime sector will shift its energy mix from almost entirely oil to 50% low- and zero-carbon fuels, 19% natural gas and 18% biomass.

Electricity will decarbonize road transport, even the subsectors that are hard to electrify, such as heavy-duty trucking, Remi Eriksen, group president and CEO of DNV, told Hart Energy.

“That will happen, not because it’s pushed so much by politics—at the beginning it is—but over time, it is becoming cheaper and cheaper and cheaper,” Eriksen said. “Electricity is very efficient, so it’s a business in itself once you have gotten over the tipping point.”

DNV, a global quality assurance and risk management company, found that electrification of transport will lead to a dramatic fall in operating costs, which will increasingly offset associated capital spending.

Electrification is not the answer to all transport fuel demands, however.

“The technology, or the physics, has its limits,” said Sverre Alvik, director of DNV’s Energy Transition Outlook. “There are certain sectors, particularly long-distance shipping and long-distance aviation, that cannot electrify because of the sheer weight of the batteries and electric mobility. As such, there are some technology no-goes where we don’t think electricity can scale.”

Policy push

Despite the progress—CO₂ emissions in the transport sector are expected to decline by 39% by 2050—decarbonization will be far too slow to meet goals set in the Paris Agreement. Transport today accounts for 25% of global emissions. By 2050, that share will increase to 30%, DNV said. 

The challenges in transport are unique due to its distributed greenhouse-gas emission sources, the report notes. Carbon capture and storage technology can reduce emissions at a particular point of origin, such as a steel or power plant, but cannot be deployed in 1 billion road vehicles. That is why targeting fuels is necessary to formulate solutions in this area. Among sources for vehicles: batteries, fuel cells and synthetic low- or zero-carbon fuels that are bio- or hydrogen-based.

“We have always said that if we want to get to net zero, high-income countries have to move much faster.” – Remi Eriksen, CEO of DNV

A prime driver in emissions reductions must be policy, Eriksen said — and it must cross borders.

“I would say it’s a huge undertaking and we need all hands on deck here to get this going,” he said. “So, you need national, you need regional, you need global—particular to the IMO [International Maritime Organization] for shipping, similar for aviation. We have to drive policy measures and it’s needed everywhere.”

Eriksen said maritime will play a key role because of the ability of ports to restrict entry to vessels not complying with a particular clean fuel standard. Another port establishing the same requirement would result in a fuel standard for a particular trading route, which would level the playing field. That kind of push is necessary to convince shippers to change fuel sources because diesel or gasoline will always be cheaper, he said.  

That can be a problem when the higher price of cleaner fuels leaves behind lower-income countries, particularly those in Sub-Saharan Africa and northeast Euroasia.

“We have always said that if we want to get to net zero, high-income countries have to move much faster,” Eriksen said. “Some parts of the world will not have the economic lifting capacity. It’s not practical. It’s not possible for them to do it.”

That will change over time, however. As technologies mature and are scaled up, low-income countries will benefit from the falling costs, he said.

But markets cannot resolve emissions issues on their own. Converting long-distance shipping to hydrogen-based fuels such as ammonia and methanol can raise the cost as much as four times that of fossil fuels. However, that estimate does not include the cost of pollution. If it did, the markets would take that into account and facilitate a much faster transition to cleaner fuels.

“Right now, the true cost of emissions and the true cost of using a fuel for humanity is not factored in, and that’s why we need an intervention,” Eriksen said.

The report lists four ways for policymakers to assist the transition of the transport sector:

• Enable existing infrastructure with drop-in fuels, or repurpose infrastructure for new low- or zero-carbon fuel;
• Strengthening existing electricity grids and add infrastructure for charging;
• Facilitate new infrastructure for clean fuels that cannot use existing infrastructure, such as pure hydrogen; and
• Stimulate the uptake of technologies for vehicles, planes and ships using new fuels, as well as policies to speed the phase-out of fossil-dependent transport through carbon pricing, tax disincentives and bans.

“I think the pathway is to always electrify as much as we can,” Eriksen said. “What we can electrify today is more than what we thought just a few years ago, so we need to have that in mind.”