The Nio EP9 self-driving concept electric vehicle (EV) is displayed during the media day of 17th Shanghai International Automobile Industry Exhibition on April 19, 2017 in Shanghai, China. VCG | Getty Images

The electric vehicle market is tiny, but it's created some very big questions about the future of gasoline demand. Morgan Stanley analysts Wednesday issued a forecast for global miles driven rising to 32 trillion by 2030, up from 11 trillion currently, with emerging markets a big driver of the growth. They say that forecast is not only bullish for electric cars and light trucks, but also for gains by gasoline-fueled vehicles. For example, they expect China, the largest and fastest adapter of electric vehicles, to increase miles traveled to nearly 9 trillion by 2040, up from 1.5 trillion currently.



"Even allowing for an aggressive penetration of EVs, we forecast gasoline demand for light vehicle transport to roughly triple by the mid-2030s before beginning a slow decline," the Morgan Stanley analysts wrote. "It's little wonder why the Chinese government is so focused on encouraging the development of a sustainable electric transport ecosystem on the grounds of energy security and environmental sustainability." Electric cars and light trucks, including hybrids, in the last year displaced only about 50,000 barrels a day of oil in a world that is using 100 million barrels a day for the first time this year, according to IHS Markit. That's small, but energy experts say when combined with other trends, like fuel economy standards, the reduction in oil demand will start to add up. "We have [electric vehicles] going up to be 30 percent of new car sales by 2040 from 1 percent now," said Jim Burkhard, who heads oil research and energy and mobility research at IHS Markit. Last year, he said there were 2.8 million electric cars on the road compared to 1.5 billion oil fueled vehicles, and the electric vehicles could reach 36 million by 2025. "Each year it will impact more and more…There's no doubt about that but the bigger demand story is fuel economy. EVs on their own are not disruptive," he said. He said the fuel efficiency efforts around the world alone should result in savings of 18 million barrels a day of fossil fuels by 2040.

Disrupting a global market

Ride sharing is what could be disruptive for the traditional car market, and so could self-driving cars. When the Ubers and Lyfts of the world have a self-driving fleet, running electric cars, that will certainly make a dent in gasoline demand. "About a third of global oil demand is from cars, and 40 percent of the growth since the year 2000 has come from cars. So what happens with cars is going to have a big impact on oil demand," said Burkhard. In a recent report on electric vehicles and energy, the World Economic Forum said automated vehicles could ultimately be 40 percent cheaper to drive per mile than a vehicle with an internal combustion engine. "Mobility service companies, especially with driverless technology — that's the case where electric vehicle sales could have a commercial footing," said Burkhard. "We think the first driverless car services will start to materialize in the next year or two…It's not 10 years from now. If that grows and people accept it, and the public gets confidence in it, that will grow quite a bit in the next decade." IHS Markit hosts the annual CERAWeek energy conference in Houston next week, and electric vehicles and the future of transportation will be a big topic. Morgan Stanley analyst Adam Jonas, who authored the report and has been bullish on Tesla for many years, will appear there on a panel. The Morgan Stanley analysts said they believe the amount of miles driven globally will rise so much because the costs of driving will drop due to shared mobility and automated technologies.

"Our conviction in the growth in miles 'pie' offers room to be constructive on EV penetration while allowing for continued growth in global gasoline demand deep into the 2030s," they wrote.

Future prospects