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Whitepaper summary

Alternatively-fueled vehicles (AFVs) are getting plenty of press these days, but their market penetration is still a long way from critical mass. The end of internal combustion engine (ICE) technology is overstated, with the global automotive market still at least a decade away of meaningful change. The scale of the change is daunting and cannot be wished away as renewables will only supply a fraction of demand growth for electricity in the coming years.

Even with all the political will in the world, it is hard to ignore market realities. Net demand for transport fuels continues to rise and is forecast to do so until at least the mid-2030s. Only a more radical “Sustainable Development” scenario, delivering the goals of the Paris Agreement would see oil demand moderate. Hydrocarbon transport demand in mature economies though is set to peak, and then eventually start to contract; Europe’s demand is expected to start falling soonest, while US demand growth stabilizes.

Geography influences how the hydrocarbon value chain should respond. Europe’s refiners have recently published their Vision 2050, which sees them responding to the energy transition through several strategies. US refiners will see less impact in the near term. Whilst Asian and Middle Eastern refiners need to monitor the rate of EV sales growth and production capacity, watching for any regional inflection points in oil product demand. Globally, markets will readjust as changes in transport fuel demand will come incrementally rather than suddenly.

This poses challenges for refiners because the slow pace of change will make it more difficult to support major capital projects. The focus therefore shifts to linking assets and their supply chains as holistic value chain optimization systems. Knowing the value of all molecules in the chain, not just the finished transport fuel is now important.


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