Goldman Sachs: Accelerated EV Sales Could Cut Global Oil Demand by 320,000 bpd by 2027

Overview

This report assesses the potential negative impact of accelerating Electric Vehicle (EV) sales on long-term global oil demand against the background of recent oil supply shocks related to the Strait of Hormuz. Goldman Sachs research finds that since February 2026, there has been widespread and significant acceleration in global EV passenger car sales penetration, with the Chinese market showing the most prominent performance. The institution calculated under two scenario assumptions that this trend could reduce global daily oil demand by 130,000 to 320,000 barrels by the end of 2027, thereby providing fundamental support for a downward trend in oil prices.

Core views

Accelerating Demand Substitution: Data shows that since February 2026, globally seasonally adjusted EV passenger car sales penetration rose 3.4 percentage points, reaching a historical high of 26.1% in May (excluding the buying frenzy before the expiration of US tax credits in September 2025). Among the 15 largest EV markets, penetration rates increased in 12 of them. Clear Regional Differentiation: China is the core force driving this round of global penetration growth, contributing the vast majority of the increase; its domestic EV penetration rate surged 11.4 percentage points in just a few months. In contrast, due to changes in federal EV tax credit policies, growth in the US remained relatively flat, while other OECD countries and non-OECD countries showed varying degrees of growth trends. Quantified Impact on Oil Demand: Goldman Sachs uses an empirical rule for estimation: for every 1 million vehicle sales shifting from Internal Combustion Engine (ICE) to EV, US road oil demand decreases by 30,000 barrels per day, and other regions decrease by 20,000 barrels per day. Based on this, the report sets two scenarios: under the 'Temporary Acceleration' scenario (assuming penetration rates remain at May 2026 levels), global oil demand is projected to decline by 0.13 million barrels per day by December 2027; under the 'Persistent Acceleration' scenario (assuming penetration rates continue growing linearly according to the February-May trend), the demand loss will reach 0.32 million barrels per day. Double Squeeze on Stock and Incremental Markets: The report emphasizes that the current calculation only considers stock increases brought by new car sales, but in reality, high oil prices have prompted existing owners to change driving habits (e.g., plug-in hybrids using more electricity, multi-car families prioritizing EVs). China's gasoline and related product sales fell year-over-year by over 20%, while charging volume surged, confirming that the substitution effect in the stock market is occurring. Additionally, the analysis does not include the substitution potential of two/three-wheeled electric vehicles (which have very high shares in India, Vietnam, and China) and non-road fuel sectors (such as petrochemicals), so the actual negative impact on oil demand may be larger than the calculated value.

Analysis framework

Goldman Sachs first used the High-Frequency Data Tracking (Nowcast) method to seasonally adjust global and major market EV and total passenger car sales to identify real penetration rate trends. Subsequently, the institution utilized historically established 'sales conversion-oil demand impact' empirical coefficients (30 kb/d per 1 million vehicles in US, 20 kb/d per 1 million vehicles in other regions) to convert excess EV sales growth into specific oil demand loss figures. Finally, by setting two different penetration rate evolution paths ('Temporary' vs 'Persistent') and combining the macro background of Hormuz supply disruptions, it derived the logic for downward pressure on medium-to-long term oil prices.

Methodology notes

• Industry/Industrial Analysis FrameworkSubstitution Effect Analysis

  Technology Substitution and Cross-Price Elasticity

  When the price of one commodity (such as gasoline) rises, consumers switch to its substitutes (such as EVs powered by electricity). The research report not only focuses on substitution in new car sales but also emphasizes how high oil prices stimulate 'stock substitution', where existing owners reduce fuel consumption by changing driving habits.

• Industry/Industrial Analysis FrameworkPenetration S-curve

  Acceleration and Linear Extrapolation of EV Penetration

  The research report judges industry sentiment by observing the change slope of the proportion of EV share in total auto sales (penetration rate). The 'Persistent Acceleration' scenario mentioned in the report essentially assumes that the current high-growth slope will remain linear for a certain period in the future, which is a common method for judging the popularity speed of new technologies.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Decomposition of Volume and Price Drivers in Road Oil Demand

  In analyzing oil demand, total demand is split into 'miles driven/vehicle stock' (volume) and 'energy consumption per unit/fuel choice' (price/structure). The report points out that even if total vehicle numbers grow limitedly, changes in fuel structure (from oil to electricity) will directly cut the physical consumption of oil.

Key data

• Global EV Penetration Increase3.4 percentage pointsSeasonally adjusted increase from February to May 2026
• Global EV Penetration Rate (May)26.1%Historical high (excluding 2025 September anomaly)
• China EV Penetration Increase11.4 percentage pointsLargest increase among major global markets during the same period
• 2027 Oil Demand Shock (Temporary Scenario)0.13 million barrels per dayAssuming penetration rates remain at May 2026 levels
• 2027 Oil Demand Shock (Persistent Scenario)0.32 million barrels per dayAssuming penetration rates grow linearly based on previous trends
• Year-over-Year Change in China Gasoline SalesOver -20%Reflecting substitution effects in the stock market

Impact & implications

The research report believes that the acceleration of global EV sales makes the previously proposed bearish oil price scenario more reasonable. In this scenario, in addition to short-term supply disturbances caused by interruptions in the Strait of Hormuz supply, long-term demand destruction will become the key factor suppressing oil prices. If the acceleration of EV penetration rates is persistent, then even if geopolitical conflicts lead to short-term supply tightness, the Brent crude oil price may still fall back to the level of $50+ per barrel by the end of 2027. This means investors trading geopolitical premiums need to be wary of long-term valuation suppression caused by structural demand decline.

Risks

• Strait of Hormuz supply constraints last longer than expected, bringing significant upside price risk.
• EV sales acceleration may be temporary; if subsequent penetration rate growth stalls, the impact on oil demand will be less than expected.
• Electrification progress in non-passenger vehicle sectors (such as heavy trucks, aviation, shipping) is slow, offsetting some of the passenger vehicle oil demand decline.

What to watch

• Whether global and major regional (especially China) EV penetration rates in subsequent months maintain high levels or continue to rise.
• Duration of supply interruptions related to the Strait of Hormuz and restoration status.
• Monthly high-frequency data changes in global gasoline and diesel consumption.