Has Norway Reached Peak Demand?

Fuel consumption in Norway declined in 2017 for the first time in several years. Have Norway’s electric vehicle policies finally resulted in peak oil demand there?

One of the examples I have offered up for those who believe that peak oil demand is right around the corner due to the rise of electric vehicles (EVs) is Norway. For many years, Norway has had the highest growth rates and highest penetration of EVs in the world. This is a result of generous tax breaks and incentives like free city tolls and parking, combined with heavy taxes on diesel and gasoline.

As I explained in a 2016 article, Norway’s growth rate for EVs had averaged an incredible 110% per year for seven years. Nevertheless, crude oil demand had risen during that time span. Further, Norway is surrounded by members of the European Union (EU). During that same time frame, EU oil demand had declined by 14%. Norway lagged far behind EU countries despite its explosion of EV sales.

In a 2017 article, I reported that EVs had achieved a 5% share of all passenger cars on Norway’s roads at the end of 2016. That was greater than five times the market share in the U.S. It was also reported that 42% of all Norway’s new car sales last June were EVs.

Nevertheless, and despite the fact that all of Norway’s neighbors with similar demographics had seen double-digit declines in oil demand over the previous decade, Norway’s oil demand increased.

One of the explanations for this seeming inconsistency is that Norway’s population is growing. In addition, there are lots of gasoline- and diesel-powered vehicles still on the roads. But one thing is obvious. At some point, an increasing share of EVs on Norway’s roads will impact the country’s oil consumption. It just isn’t happening as quickly as most EV proponents might have imagined.

But an inflection point may have been reached in 2017. Last month the Norweigan government released its final 2017 figures for Sales of Petroleum Products. For the first time since at least 2014, Norway’s consumption of automobile fuel (gasoline and diesel) declined across the board.

Motor gasoline sales declined by 2.9%, dutiable diesel fell by 2.7%, and duty-free diesel declined by 2.6%. This decline follows sales that were flat in 2014, and then grew by 1% in 2015 and 3.2% in 2016. Overall petroleum product sales declined by 2.2%, although some categories of consumption, such as heavy fuel oil, jet kerosene, and other petroleum products all showed higher consumption.

Norway’s automobile fuel consumption is still higher than it was in 2013, and preliminary figures show that April 2018 petroleum product sales were 10.9% higher than in April 2017. Total automobile consumption in April was about 3% higher than in April 2017.

So it’s a bit premature to suggest that Norway’s fuel consumption is finally on the decline due to surging EV sales. But, this could finally be the start of the decline you would expect as EVs continue to increase market share.

In any case, Norway’s experience is instructive. The market share of EVs on Norway’s roads, following years of triple-digit growth, is above 5%. Growth rates in the U.S. have been far lower. Even though Norway’s growth rate has slowed in recent years, its 41% increase of EV sales in 2017 was still well ahead of the U.S. EV growth rate of 26%.

If Norway tells us anything, it’s that even rapid EV growth isn’t going to lead to peak demand as quickly as proponents think. It isn’t even clear that peak demand is yet occurring in Norway, and it is going to take years of double-digit EV growth for the U.S. to reach Norway’s level of EV penetration.

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