More Cars but Oil Demand May Plateau

This summer may see a near-record number of cars on the road as three in four Americans plan to hit the road between Memorial Day and Labor Day weekend, according to fuel saving platform GasBuddy’s 2024 Summer Travel Survey. Respondents are planning two road trips on average, with almost half expecting to drive five or more hours to reach their destination.

Even though higher gas prices are weighing on travelers’ minds, not many are thinking about purchasing an electric vehicle (EV) as a way to help alleviate fuel costs: Only 15% of survey respondents are considering an EV, but this may change.

More cars but less oil use per vehicle

Goldman Sachs Research analysts estimate the global number of vehicles, both new EVs (NEVs) and internal combustion engine (ICE) fuel cars, to grow 60% by 2040. This is based on Goldman Sachs economists’ forecast that global real GDP could rise by 60% over this period (2.7% average annualized) and UN population projections. Emerging market economies are expected to drive nearly 90% of vehicles growth.

Yet oil use per vehicle is likely to fall by 65% to 285 gallons per vehicle per year, by 2040. This is due to two factors: rising NEV sales and better fuel efficiency of ICE cars.

Even though EVs are hitting a road bump with slower adoption rates, our analysts continue to anticipate NEVs to account for up to 70% of global vehicle sales in 2040, and 100% in China and Europe by that time, taking up a third of the global vehicles’ stocks. The number of ICE vehicles will grow at a slow 1% average annualized pace until reaching a peak in 2035.

Most developed market economies have already peaked in road oil demand, namely the US in 2004 and Germany in 2000. The continuing oil demand in emerging markets is likely to keep growing through 2040 as there is more room for vehicle sales growth in low-income countries. China is expected to peak in the mid-2020s given their rapid NEV growth.

Considering these factors, Goldman Sachs Research analysts believe the decline in developed markets road oil demand nearly offsets the increase in emerging markets by 2040, unless the EV adoption rate continue to slow.

Forecasts can change due to many unforeseen factors, but at present, the price at the pump is still a concern for many road travelers.

Tips to spend less at the pump

Higher gas prices aren’t stopping Americans from hitting the road, but with a bit of planning, road vacationers may be able to save at the pump and put those savings towards the fun parts of their travel budget. Here are some tips to consider.

1. Plan your next gas station fill-up with online tools. There are fuel-saving apps and online road maps that frequently update gas station prices. Planning which of these cheaper stations to hit enroute could save you 10 to 50 cents per gallon over just a few blocks.
2. Pay in cash. There are several chain gas stations that offer discount prices if you opt to pay in cash. Ensuring a few of these stations are close to or on your travel route could help you save.
3. Join a loyalty program. Shop around for the best loyalty programs for your wallet. Many programs give bonus discounts, introductory offers, and reward points. Best of all, they’re usually free to sign up.
4. Check your state lines. If you’re driving across states, it might be beneficial to research beforehand which state has cheaper gas, so you can fill up before or after crossing state lines.
5. Do you really need premium fuel? The American Automotive Association (AAA) found in their research that premium fuel generally provides no added benefit. Unless your car manufacturer recommends or requires premium gas for your vehicle model, the lower grade fuel may work just as well. Consult your car owner’s manual for more information.