For the first time in more than 100 years the automotive ecosystem faces a convergence of technological, political, and economic forces that could fundamentally alter how cars are sold, used, and powered. Driverless technology, electric vehicles, new mobility services, and public policy are prime disruptive forces. This change is underway; the only question is how quickly it will occur and how transformative it will prove. The majority of observers automatically assume that these changes will result in reduced demand for oil - that is obvious, isn't it? The recent IHS Markit study Reinventing the Wheel and the follow-on study Reinventing the Truck have revealed that the changes and their subsequent impact on oil demand are far more complex than they first appear, and are certainly not linear.

In 2017 IHS Markit completed a new mobility study, Reinventing the Wheel (RTW): the Future of Cars, Oil, Chemicals, and Electric Power. To analyze the full impact of the changes on these three industries, IHS Markit created a core team drawn from IHS Chemicals, IHS Automotive, and IHS Energy. The RTW study modelled the penetration of new mobility services and powertrains, including electric vehicles, under two scenarios to 2040. It also detailed the impact on global oil demand, implications for chemical feedstocks, chemical and plastics inputs into the automotive industry supply chain, and technology implications.

IHS Markit established an entirely new modelling approach, quantifying fuel demand and vehicle miles travelled, not only by power train, but also by mobility channel (ride hailing, car sharing, personal use). In Detroit and London, leading chemical, energy, and automotive companies offered their input into the IHS Markit scenario assumptions which underpin RTW. In 2018 IHS Markit extended this approach to the future of the truck in Reinventing the Truck (RTT) and has launched a new subscription service Mobility and Energy Future (MEF).

When people think about the future of road transportation, they tend to immediately think of electric vehicles, an image which is supported by today's news headlines. The seemingly inevitable increasing uptake of electric vehicles will take away potential fuel market opportunity from oil, it is just a question of how fast this happens.

However, the RTW study highlighted that this transformative change is only one dimension, the electrification dimension, of the multi-dimensional mobility revolution.

The other two key dimensions are:

• Ownership type: where people own/drive their own vehicle or share vehicles
• Automation level: self-driving or highly automated vehicles

The multi-dimensional nature of the mobility revolution is shown on the IHS Markit mobility cube (see Figure 1).

Figure 1: IHS Markit mobility cube

At present the world is and always has been firmly rooted in the front, bottom left quadrant of the cube - Traditional Mobility. In this quadrant oil is the dominant vehicle fuel and people mostly own and drive their own vehicles.

Progress along the Electrification axis clearly has a negative impact on oil demand. However, movement along the other two axes has a less definitive impact on oil demand. Along the Ownership type axis, we see increasing use of taxis and ride-hailing services like Uber and others. This increases vehicle miles travelled (VMT), because the vehicle has to drive to the user first before reaching its final destination, it also allows more people to use cars by increasing access to mobility.

Similarly, movement along the Automation axis can reduce the operating cost of the vehicle, making vehicle travel more attractive, again increasing VMT. It also makes vehicle travel more fuel efficient.

Therefore, movement along two of the three mobility cube axes from the current position has the potential to have a positive impact on oil demand for road transportation.

What the IHS Markit study has revealed is that the world is right at the start of the mobility revolution, making it very difficult to predict the future because it is not possible to rely on past trends and changes any longer. In addition, the pace of change and the impact on oil demand is far from clear and there will not be a linear change of straight fuel substitution by electric vehicles.

This blog is a summary of some of the key findings from the IHS Markit Reinventing the Wheel portfolio, which includes the Reinventing the Truck Study and our new subscription service - Mobility and Energy Future.

To learn more please contact the authors:

Fellipe Balieiro is Director, Energy & Mobility team in IHS Markit based in Houston

fellipe.balieiro@ihsmarkit.com

Nigel Griffiths is Chief Automotive Economist, IHS Markit based in London

nigel.griffiths@ihsmarkit.com

Spencer Welch is Executive Director, Oil Midstream & Downstream, IHS Markit based in London

spencer.welch@ihsmarkit.com