Petrol was meant to be Exhibit A of the energy transition. And it is – but not how the green intelligentsia ever anticipated. Rather than becoming the fuel to display the earliest and most pronounced peak in demand as the world embraced electric vehicles, petrol is instead signalling the endurance of fossil-fuel consumption.
The stronger-than-expected demand comes even before significant pro-petrol regulatory changes announced in both the United States and Europe in recent days take effect. In Washington, US President Donald Trump has rolled back the fuel-economy targets set by his predecessor Joe Biden. Instead of achieving 50.4 miles per gallon (81 kilometres per 3.8 litres) by 2031, US cars will only need to meet 34.5 miles per gallon. Earlier, Trump hit the EV sector by removing federal subsidies.
Over the past 15 years, there has been an increase in the dominance of large Australian firms in their respective markets.Credit: James Davies
European Commission president Ursula von der Leyen, meanwhile, this week bowed to intense pressure from Germany and Italy to abandon an effective ban on the sale of petrol and diesel cars beyond 2035. Brussels, which initially mulled delaying the ban five years to 2040, ultimately decided to abandon it completely without setting a new target.
In London, the British government has announced a new tax on EVs starting in 2028 that could reduce sales by hundreds of thousands of vehicles.
Put this all together, and it means the energy market’s barrel counters will need to increase their petrol forecasts for the rest of the decade. It’s an exercise they are getting used to.
After the pandemic, the International Energy Agency said petrol demand wouldn’t ever surpass its 2019 level. The theory was that as EV cars became more popular, appetite for gas guzzlers would be “disproportionally” impacted. “This means that the fuel is likely to exhibit the earliest and most pronounced peak in demand” of all elements of the oil market, the IEA wrote in an influential report in 2023. But demand quickly surpassed the pre-pandemic peak and kept on growing.
Rather than becoming the fuel to display the earliest peak in demand as the world embraced electric vehicles, petrol is signalling the endurance of fossil-fuel consumption.
Last year, petrol consumption posted an all-time high of 27.36 million barrels a day. The IEA initially thought again that was the peak, and suggested consumption would drop in 2025. Instead, year-to-date petrol demand has jumped to a fresh record high of 27.62 million barrels a day.
As things stand, the peak has been delayed already by six years, to 2025 from 2019. And I wouldn’t be surprised if, once forecasts are updated, it’s pushed even further forward.
