Paisie: Dutch Vehicle Fleet Foreshadows Structural Shifts

In last month’s article, we put forth our reference outlook for 2024 with respect to the crude oil market, which, in summary, includes the following:

• Based on the economic outlook coupled with the outlook for alternative fuels and EVs, we are expecting oil demand to increase at a moderate pace, in the order of 1.3 MMbbl/d, and despite the struggles of China, Asia-Pacific will represent the bulk of increased demand.
• From a supply perspective, we are expecting that OPEC+ will attempt to be proactive in managing supply to support oil prices. We also think that OPEC+ still has the ability to influence the oil market, despite the growth in non-OPEC supply. However, to convince oil traders to adopt a more bullish sentiment, OPEC+ will need to adhere closely to its supply targets and be willing to make additional cuts, if needed, to support oil prices.
• We are forecasting that the price of Brent crude will increase during the second and third quarters of this year and move toward $90/bbl.

We are still holding to this outlook as our reference case, even though, as we highlighted last month, there are upside and downside risks to the forecast. It is still possible that the geopolitical situation could spin out of control and result in oil prices spiking. Alternatively, oil prices could tumble if growth in oil demand disappoints or if OPEC+ loses control of the oil supply. 

In addition to our ongoing assessment of the short-term dynamics, we have recently updated our long-term outlook pertaining to hydrocarbons, including the production outlook for crude oil, natural gas and NGLs. Our reference forecast considers the macro-level factors, as well as the structural changes, including the evolution of the vehicle sector. An example of the extent of the change is indicated by the forecast of Netherlands’ vehicle fleet.

The light-duty vehicle (LDV) ownership level in Netherlands stood at 587.3 vehicles per 1,000 people in 2022, which is similar to most developed markets. By 2030, the Netherlands’ ownership ratio will grow to 610.2 before reaching 643 by 2050. LDV fleet growth is thus expected to outpace population growth in the Netherlands over the forecast through 2030. Gasoline vehicles currently make up the largest portion of the Dutch LDV fleet, although diesel vehicles still covered about 19.3% of the fleet in 2022.

Thanks to the exponential growth in battery electric vehicle (BEV) sales experienced in recent years, the domestic BEV fleet reached a share of 3.7% in 2022. In the outlook to 2030, the BEV fleet is expected to see a four-fold growth to account for 16.7% of the national fleet, significantly outpacing the broader regional 2030 BEV penetration of 7.7% in Europe. In the longer term, and as aging internal combustion engine vehicles are gradually retired, the BEV fleet in the Netherlands could reach a market share of 75.7% by 2050. 

Conventional vehicles in the LDV fleet face the greatest displacement threat from BEVs over the 2022-2030 period, with these vehicles seeing a growth of 1.44 million units. As growth accelerates over the later part of the forecast, BEVs are projected to increase by another 6.89 million units in the 2030-2050 period. Besides BEVs, other low-emissions alternative powertrains also see significant growth in Netherlands, although their penetration remains more limited overall.

In particular, conventional and plug-in hybrids are projected to see a strong increase in their vehicle pool in the medium term, although they will be increasingly displaced by BEVs in the longer term. After their relatively strong growth in the early 2020s, zero-emission vehicle sales mandates are likely to constrain a stronger growth of plug-in hybrids, which are expected to reach a more moderate market share of 6.2% by 2030. Despite multiple efforts to boost sales by expanding refueling infrastructure, hydrogen-powered vehicles are not expected to have a significant impact on the domestic LDV fleet, remaining uncompetitive against BEVs.

The expanding role of BEVs will be supported by the development of associated supply chains, as indicated by our forecast of global EV battery production capacity.