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This Is What Electric Cars Will Do To The U.S. Gas Demand

A charging station for electric cars.  To fight the 'war onA charging station for electric cars.  To fight the 'war on
An EV charging station.Zhang Peng LightRocket — Getty Images

Demand for U.S. gasoline is expected to fall by 5%—and could be cut by as much as 20%—over the next two decades, according to a new report released Monday by energy consulting firm Wood Mackenzie. The culprit? Electric cars.

The U.S. currently uses more than nine million barrels of gasoline a day. According to the report, if electric cars gain more than 35% market shares by 2035, the U.S. could see a cut from nine million to two million barrels used a day.

The report shows a bolder outlook for electric-car adoption than expected. Despite this, electric cars haven’t evolved at a rapid rate, thanks in part to low fuel prices and limited battery life that meant drivers had to recharge every 100 miles. However, even though the U.S. market for electric cars remains small, more electric cars are coming to market as tightening air-pollution regulations in places such as Europe and China force auto makers to engineer better electric vehicles, according to the Wall Street Journal.

With electric cars already in multiple market segments, along with Tesla’s (TSLA) decision to build cars with sizable batteries that can run for more than 200 miles before recharging, many competitors are further innovating their electric vehicles. For example, earlier this year, Ford Motor (F) announced plans to spend $4.5 billion to produce 13 electrified vehicles models and is working on an electric car to compete with Tesla.


Tesla’s Model S is perhaps a preview of the success the Tesla Model 3 will have, which will begin rolling out to customers in 2017 starting at about $35,000. The Model S has increasingly picked up more market share within the luxury car market since its 2012 introduction, and 2015 was the first year it pushed the Mercedes Benz S class out of the lead. Based of the success the Model S has had, Tesla’s Model 3 has the potential to push electric vehicles into the mainstream in the next decade, according to the report. In April, the Model 3 already had 325,000 reservations implied $14 billion in future sales.

The new ins’t all bad for oil and gas companies, though. The report concluded that while petroleum demand would fall, natural-gas demand would likely go up because utilities would need to generate more electricity, and more of it would increasingly come from natural-gas-burning power plants as well as renewable-energy sources.