The Electrification of Road Transport Will Turn Out to Be…
The world economy is grappling with a gradually worsening diesel shortage. In fact we might have already passed peak diesel in 2023, already. Despite claims to the contrary the world is still fed, moved, mined and built using this extremely energy dense fuel, thus its increasingly tight availability is starting to become a limiting factor to the growth of the world economy. The question poses itself: can the electrification of transport and mining ease the pain somewhat, or is it yet another myth?
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World oil and natural gas supply is about to peak, then begin its long decline in the years ahead. While this statement stirred great controversy two decades ago, today it seems to be normal news. Almost too normal — as if the world no longer needed oil. Looking at the prices alone West Texas Intermediate at $65 per barrel seems to be a bargain, especially when compared to the price of gold or other commodities. Surely, if we needed more petroleum its price would be much higher, right? Well, as usual, things are a bit more complicated than that. In fact, I argue, the collapse of oil prices foreshadow a much greater than expected fall in oil supply, but let’s not get ahead ourselves just yet.
Oil is not just another commodity. It is still the lifeblood of this civilization thanks to its immense energy density, portability, low weight and widespread availability. Despite the fact that its use is a major contributor to climate change, we still heavily depend on it for agriculture, mining, long distance transport and construction. Yet, as the image below (taken from the same Ember document we discussed last week) shows: transitioning to an electricity driven transport system takes longer than expected. To be on the optimistic side I could say we just have to wait another century. Or two.
All that glitters is not gold
I’m not here to spread unwarranted optimism, though. We simply don’t have time till the end of this century to make a dent on fossil fuel use in road transport — and not primarily because of climate concerns. Diesel fuel availability worldwide is already on a high plateau, even as we add more and more unconventional oil and natural gas liquids to the mix we euphemistically call ‘oil’. Before 2014 every barrel of oil added to world supply resulted in a proportionate increase in diesel fuel consumption: the conversion ratio hovered around 30% (i.e.: one third of each barrel of oil was turned into gasoil). After 2014, however, this tight correlation started to break down: diesel consumption could no longer keep up with growth in oil supply. While prior to 2014 diesel supply grew at a steady 2% year-over-year, after 2014 that annual growth rate virtually collapsed by an order of magnitude to 0.28%. What’s that all about?
As we have seen from the ratio of electricity use in road transport, that abrupt slow-down in diesel consumption growth could not come from truck drivers switching to batteries all of a sudden. If we take a good hard look at the source of “oil” supply growth since 2014, however, we might quickly realize that not all that glitters is gold — i.e. not everything is “oil” in that ever growing mix. Production growth of conventional onshore and shallow water crude — the best inputs to make diesel fuel from — began to stall in the middle of the 2000’s already, with almost all new sources of oil coming from unconventional wells ever since 2015. These new sources of petroleum, especially tight oil (oil trapped in low-permeability rocks like shale and limestone) and natural gas liquids (hydrocarbons extracted from raw natural gas during processing, including components like ethane, propane, butanes, and pentanes), however, contain very little if any diesel compounds (1). Sure, refineries could and did make a lot of plastic and gasoline out of this new found “oil”, but very little truck fuel. You see, this is the problem with trying to “replace” conventional oil with all kinds of liquids produced by the petroleum industry: most of it is unsuitable for use in trucks, excavators, ships, locomotives, combined harvesters and the rest (2).
What does the future hold, then? Well, not more conventional oil, that is for sure. According to the forecasts prepared by Rystad Energy and used by the IEA, we have 2–3 years till both oil and natural gas production peaks worldwide, then begins to decline. And if you take a look at the chart below, you can see that conventional oil production will experience an especially steep decline, despite additions from investments in existing and approved projects. Unconventional oil production will continue to expand into the future, but it will be unable to offset the decline from traditional oil fields, let alone make up for the fall in diesel fuel production.
Diesel availability can thus be expected to drop precipitously in the decades ahead, foreshadowing serious problems in road transport, mining, shipping and mechanized agriculture.
Oil companies will not sit idle, and watch their market collapse, though. They will do everything to at least mitigate that catastrophe ahead. According to the IEA analysis linked above:
“After a primary recovery period, during which oil and gas is produced via natural reservoir drive mechanisms, operators can deploy a variety of measures to boost production or to slow decline. This includes infill drilling of both vertical and horizontal wells, pumping and lifting, large-scale injections such as water flooding, and enhanced recovery techniques. In practice, these activities can occur in sequence or in combination according to suitability, availability and economics of the technology, and in accordance with a company’s reservoir management practices.”
However, these techniques are not without their own risks:
“Once well density is maximised and infill drilling slows, production decline may accelerate above the rates observed before the new drilling was undertaken.”
To put it bluntly: enhanced oil recovery can buy us a little time, but at the cost of an abrupt decline in the end. Not the most reassuring news, if you ask me. Switching fuels sources will be of little help either. Encouraging home owners to change to electric or gas heating from oil, will not solve anything since both are dependent on a non-renewable resource equally prone to peak and decline just like oil (40% of US electricity is still generated by natural gas). The same goes to trucks, buses and agricultural machinery powered by CNG or LNG: since worldwide gas production is about to peak together with oil, switching between the two energy sources will not improve the situation the slightest.
Electrons to the rescue!
That leaves us with one thing to pin our “hopes” on: the rapid electrification of road transport and mining. And why not agriculture or container and bulk shipping? — one might ask. Well, weight is already a huge issue when it comes to agricultural machinery. Soil compacted by tractors can absorb less moisture and plant roots do not develop properly in them. Ocean shipping, often covering thousands of miles, is also “hard” (read: impossible) to electrify — no battery would last a month long journey across the Pacific. And while wind sails and solar panels could reduce fuel consumption by a couple of percentage points, they cannot completely eliminate it. That leaves us with using batteries in road transport, thereby saving fuel for agricultural use and shipping where heavy batteries and electrification is still not an option.
So what are the trends in heavy-duty electric vehicles? According to the EIA’s Global EV Outlook 2025 electric bus sales have already reached an invisible ceiling (around 60% of all units sold) in China, while other regions are still dominated by diesel bus sales. Demand for electric trucks, on the other hand, is still in the 1–5% range — even in China. No wonder, despite the optimistic sentiment shared by the EIA and some other organizations, long distance (500 km range) battery electric trucks are still two to three times more expensive than regular ones, and require multi-hour long stops to recharge. Using a fast charger, on the other hand, would degrade the battery much faster than regular charge, so the cost of replacing batteries much more often would quickly negate the benefits of not having to wait several hours for each recharge. And while battery swapping could be an option, building continent wide networks of standardized battery swapping stations is still a pipe dream. Consequently electric trucks seem to remain stuck in the niche of short distance milk runs, parcel deliveries, or drayage (the transport of shipping containers over a short distance to their final destination).
Battery electric trucks are ideal for cycles with combinations of lower daily mileage, lower speeds, and predictable routes, not for long distance delivery consuming the vast majority of diesel fuel worldwide.
Then what about electric vehicle trends in mining? Well, apart from some promising experiments, the market for battery electric mining equipment is virtually non-existent at the moment. Even the most optimistic analysts admit, that there are serious productivity concerns when it comes to switching to battery electric mining trucks: “Currently, electric trucks cannot match the uptime of diesel trucks, which require only about 10 minutes of refueling per day compared to the 1 to 2 hours battery charging.” And not only that. “Battery technology remains a key obstacle, with current advancements from suppliers like CATL, ABB, and Northvolt only recently meeting the high demands of haul trucks. The lack of a unified standard in battery designs and chemistries complicates the selection of the optimal solution for mining applications.” From where a 32% compound annual growth rate (unprecedented in any other business) would come from then, remains a mystery for me. And remember, if Rystad’s calculations are correct, we are looking at a nosedive in conventional oil production in the years ahead. We don’t have decades to develop and to ramp up new battery technologies.
The little time left to ramp up electrified mining and road transport is not the only limitation, though. While battery technologies could and most probably will improve in the future, generating the megawatts of electricity needed to fast charge these huge batteries will require a massive expansion of the electric grid, or necessitate a similar scale power generation on site. Since grids are overloaded already — and because most major mines are far away from civilization — this latter, however, could only mean natural gas turbines. “Renewables” could only provide some auxiliary support, as a mine cannot be shut down just because its overcast outside or the wind isn’t blowing. (The same goes to long distance trucking, just sayin’.) This continued reliance on fossil fuels begs the question, though: what’s the point of electrification if we just swap one fast depleting fuel (diesel) to another one (natural gas), or in the case of China: coal?
Economic reality
Finally this takes us back to the economics of extracting and making these fuels. As we have seen above, demand for diesel was not dented by electrification or alternative fuels. As a result the world is already grappling with a serious diesel shortage, evidenced by record high refinery margins made on making and selling this type of fuel. Ever since 2022 (the failed return to growth after the pandemic and Western sanctions completely upsetting diesel supply in the EU) there is a chronic shortage of the right kind of oil to make diesel from. And with relentless attacks on Russian refineries, diesel export capacities are dwindling as well. Adding all sorts of liquids from unconventional sources, on the other hand, have only resulted in a decline in oil prices, and a widening gap between desires and reality. After ten years of struggling conventional oil (and consequently diesel) supply, the penny has dropped: real, productive economic growth could no longer continue. Something got to give: the Chinese building boom had to end, and Europe’s prosperity had to be sacrificed on the altar of continued financial expansion — lest we wanted to risk tipping the entire system over.
Perhaps the best indicator of this combination of demand destruction, mounting recession fears and flight to safety is the gold to oil ratio, representing how many barrels of oil you can buy with one ounce of gold. You see, the price of oil is the first to plummet during a recession, while gold is seen as a safe haven to protect “wealth”. Whenever this ratio blows out, it indicates a flight to safety and prevailing market caution. As shown on the chart below, we are well past anything we have seen in the past — except for the 2020 health crisis, which resulted in negative oil prices. Such low prices, however, virtually guarantee the outcome laid out by Rystad and the EIA above: oil at $65 or below is simply too cheap for most of the drilling companies to go after. The material costs of drilling ever deeper, less and less productive and ever faster depleting wells simply does not worth the expenditure at these low prices. And soon, not even at $95 a barrel.
Conclusion
Based on these premises electrification can only slow the decline in transport and mining volumes somewhat, but not considerably. As the looming diesel crisis becomes acute, the price of this fuel could skyrocket — but only for a very short time. Since our entire world economy with its six continent supply chains and high material intensity relies on cheap fuel to operate, should such a price spike occur businesses would go bankrupt in droves. A slow but steady rise in the price of diesel, on the other hand, could make anything mined, transported or built by oil so expensive, that people could no longer afford them, leading to a deflationary crisis. Either way demand for diesel would fall in tandem with supply, leaving us with less and less stuff manufactured then brought in from far away. Eventually all the benefits of globalization would be eliminated: no more cheap clothes made available by cheap labor in Cambodia, or battery minerals mined in the Congo, copper in Chile and nickel in Indonesia.
The future will be increasingly localized, with much less product variants and with much simple lifestyles. Remaining diesel supplies will be diverted entirely to maintain agriculture and food delivery, focusing on plant based foods (animal husbandry requires a lot more fuel than growing peas and beans). For the average citizen this will translate into higher food and skyrocketing meat prices, leaving little to no budget to buy anything else than a shirt or a pair of shoes every now and then. (Especially so, if you consider the effect of forced localization raising the cost of doing anything as opposed to just importing stuff from the cheapest source.) Infrastructure projects will be abandoned, just like major housing developments as these activities take a lot of fuel to complete.
How our complex, self-adaptive world economy would react to such a shock as a withdrawal of its prime source of energy, is anyone’s guess. We are looking at a highly volatile situation ahead, lasting decades into the future. Currency crash, inflation, deflation, stagnation and decline are all in the cards. Once the initial part of the crisis is over, we will be looking at a totally different economy though. Many companies will go bankrupt, and the workforce hence released would have to find jobs in agriculture and local workshops, as the demand for cheap labor could only increase with less and less affordable fuel to drive machinery. Adopting a much less materially intensive lifestyle could, however, match the availability of diesel supply, and together with a persistent fall in birth rates could ensure a smooth landing towards the end of this century when oil finally runs out. Yes, I know this might sound messy and pessimistic for those pinning their hopes on this technological civilization going on forever and a day… I have to ask, though, how exactly did you expect ‘infinite growth on a finite planet’ to play out then?
Until next time,
B
Thank you for reading The Honest Sorcerer. If you value this article or any others please share and consider a subscription, or perhaps buying a virtual coffee. At the same time allow me to express my eternal gratitude to those who already support my work — without you this site could not exist.
Notes:
(1) Extra-heavy oil and bitumen require a lot more energy to extract, “cook” and refine into diesel than conventional oil. Thus if the price is not high enough, it won’t be done. And since high diesel prices are a poison to the economy, the incentive to crank more diesel fuel out of extra-heavy oils will be rather short lived.
(2) Since less than one percent of trucks run on liquid petroleum gas (LPG), ethane, liquid natural gas (LNG), propane, etc. the sudden drop in diesel supply growth after 2014 could not be replaced by natural gas liquids flooding the market… Biodiesel was added to the mix in 2005–2007 already, so its use could not play a role here either. Not that it could: growing crops, delivering them into a bio-fuel plant and then making biodiesel all takes diesel and natural gas to do — so much so, that the whole exercise barely makes sense energetically (if at all).
I am trying to adopt a lifestyle from the early 20th century. They didn't have internet, but they had telegrams, postal mail, and radio. A little electricity can go a long way if you don't need it for heat or transport. And neighbors are the most important resources for a civilization. Ask anyone who has survived a flood or wildfire. Thank you, B, for helping us see through the nonsense about needing more data centers and more housing developments.
From B's post:
"Adopting a much less materially intensive lifestyle could, however, match the availability of diesel supply, and together with a persistent fall in birth rates could ensure a smooth landing towards the end of this century when oil finally runs out. Yes, I know this might sound messy and pessimistic for those pinning their hopes on this technological civilization going on forever and a day"
Actually, this sounds far too optimistic. The global market economy, capitalism and the financial system that undergirds capitalism are not going to survive continuous economic depression. A financial crisis could cause a collapse virtually overnight and there is no such thing as a global command economy waiting in the wings to take over.
Historically, times of food stress cause birth rates to go up. This is why the "Limits to Growth" Standard Run shows birth rates increasing rapidly when food per capita declines significantly. The increased birth rates can't keep up with mortality rates however, so the population will decline, but it won't be a "smooth landing". It will be a die-off.