Analysis: EV Sales Increase Amid Fuel Price Anxiety Could Hasten Global Oil Demand Decline

Sharply higher fuel prices since the start of the Middle East conflict are driving more consumers around the world to buy electric vehicles to avoid paying at the gas pump, which could accelerate the decline in global oil consumption, analysts say.

Goldman Sachs energy analysts this week forecast the acceleration in EV passenger car sales could decrease global oil demand by as much as 320,000 b/d, or 0.3%, in 2027.

The U.S. investment bank estimates global new EV sales have increased by 3.4pts to an all-time high of 26.1% of total car sales in May compared to February. Also, sales in 12 out of the 15 largest global EV markets have risen between February and May, it said.

In China, EV sales have spiked 11.4pts to account for almost 60% of all car sales during the period, Goldman said, citing its own as well as International Energy Agency and government data.

China’s BYD, the world’s largest manufacturer of EVs and plug-in hybrid EVs, reported a 19% sales increase in May versus April, with other major Chinese EV makers including Leapmotor and NIO also posting double-digit point gains during the period, according to Bank of America auto analysts.

“Ongoing energy price fluctuation and high energy prices definitely have a longer-term psychological impact on consumers,” said Stephen Dyer, Head of Asia-Pacific Automotive and Industrials at consultant AlixPartners.

With EVs already accounting for half of all of China’s new car sales, any additional increases driven by rising gasoline prices could further lower long-term oil demand due to fewer internal-combustion-engine vehicles on the road, said Dyer, who is based in Shanghai.

Rising gasoline prices could boost incremental EV sales more in markets like the U.S. where EV penetration rates are much lower than those in China, Dyer said.

Average U.S. gasoline retail prices hit a peak of $4.56/gal on May 21, up around 60% from under $3/gal prior to late February, according to OPIS/AAA prices. It has since dropped below $4/gal since mid-June.

Meanwhile, annual fuel cost savings from driving an EV in the European Union grew 35% based on average oil prices in April compared to 2025, according to IEA.

Cox Automotive analysts on Wednesday forecast second-quarter new U.S. EV sales to rise to 244,000, or almost 6% of total car sales, up 13% from about 216,400 in Q1. Year over year, however, they are expected to fall 22% largely due to a surge in sales before a significant tax credit expiry in September 2025.

Wider adoption of used EVs for more price-sensitive buyers as well as fuel-efficient hybrid EVs could also decrease gasoline demand.

Cox expects used EV sales in the U.S. to increase to an all-time high of 128,000 in Q2 versus about 100,000 in Q1, which would mark a 25% increase compared to 99,975 in Q2 last year.

“With additional incentive and tailwind from spiking fuel prices, we are seeing [used EV] buyers responding to the value proposition,” said Mark Strand, Cox’s Deputy Chief Economist.

Hybrid EVs also rose to a record 14.1% of all U.S. new car sales in Q1 and are gaining momentum, according to Cox, because hybrids offer improved fuel efficiency without requiring behavioral change.

According to a Cox survey in May, about three out of four in-market U.S. vehicle shoppers said fuel prices had a major or moderate impact on the type of vehicle they plan to buy. In addition, 74% of respondents said they were more likely to consider fuel-efficient vehicles due to gas prices.

However, the number of fully electric vehicles on the roads is expected to remain much smaller than that of ICE vehicles despite strong new EV sales. According to IEA, EVs are projected to rise to 27% of the global car fleet in 2035, representing a steady increase from 5% in 2025.

AlixPartners’ Dyer said he has not seen a huge surge in EV sales in China since the Iran war, particularly with every one in two Chinese new car buyers already choosing EVs.

Still, Dyer recalled that U.S. consumers started buying smaller and more fuel-efficient vehicles following the 1973-74 Middle East oil embargo.

“That lasted maybe 10 or 15 years until they felt like, OK, oil is not going to go back up again,” he said.

–Reporting by Frank Tang, ftang@opisnet.com and Allegra Fradkin, afradkin@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com

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