Combustion road vehicles and Crude oil

Road engines burn close to half of the world's oil, so the size and fuel efficiency of the combustion fleet is the largest single driver of crude demand. Electric vehicles displaced about 1.7 mb/d in 2025 and the IEA expects about 5 mb/d by 2030, while India adds more new oil demand to 2030 than any other country, led by transport fuels.

Combustion road vehicles (energy) and Crude oil (energy): 5 relationships.

How they are linked

1. Fuel for the fleet

Physical flow · Strong · Crude oil → Combustion road vehicles

Petrol, diesel and LPG for cars, trucks and buses are refined from crude, and road transport is the largest single use of oil.

• close to half road transport's share of world oil demand, 2026

Road fuel demand depends on the size of the fleet, distances driven and engine efficiency, all of which change slowly, so it gives oil a large and stable base. Trucks and buses run mostly on diesel and are harder to electrify than cars, which keeps diesel demand firmer than petrol.

Sources: S&P Global Commodity Insights

2. Electric vehicles erode demand

Transition · Rising · EV uptake → lower road oil demand

Each electric car or bus that replaces an engine removes its fuel use from oil demand for the vehicle's whole life.

• about 1.7 mb/d oil demand displaced by EVs in 2025
• about 5 mb/d expected displacement by 2030, IEA current and stated policies scenarios
• about 9 mb/d expected displacement by 2035, current policies scenario

The IEA expects EVs to bring road transport oil demand down to around 44 mb/d by 2030 in its main scenarios. The pace varies widely by country and segment, with cars and two-wheelers electrifying faster than heavy trucks.

Sources: S&P Global Commodity Insights; IEA

3. Growth moves to India

Transition · High in India · Vehicle fleet growth → oil demand

Where car and truck ownership is still rising fast, fleet growth outweighs electrification and keeps road oil demand climbing.

• about 1 mb/d expected rise in India's oil demand to 2030, more than any other country
• around 105.5 mb/d world oil demand plateau expected by 2030

World demand is set to grow by about 2.5 mb/d by 2030 and then level off, as substitution in transport and power offsets growth elsewhere. In India, unusually, transport fuels lead the gains, with petrol demand rising about 4% a year, which makes Indian vehicle and fuel policy matter for the global balance.

Sources: The Week (PTI, IEA Oil 2025)

4. Fuel taxes

Policy · Strong · Taxes → retail fuel price → vehicle choice

Governments tax road fuel heavily, so the pump price drivers see reflects tax as much as crude, which damps or amplifies the signal from oil prices.

• ₹102.12/litre retail petrol price in Delhi, October 2026
• ₹16.59/litre Delhi VAT at 19.4% within that price

The price charged to dealers, ₹81.12 a litre in Delhi, already includes the central excise duty as well as the refinery cost, so taxes sit on top of crude at two levels. Governments can cut duties to cushion a crude spike, at a cost to revenue.

Sources: Bharat Petroleum Corporation Ltd

5. Price link: fuel cost

Cost and price · Weak · Both ways

Fuel prices shape running costs, but vehicle prices follow model cycles and input costs, so the vehicle price index barely reacts to oil.

• -0.04 monthly change correlation, vehicle price index and crude
• -0.03 12-month change correlation
• -0.02 fitted elasticity

Oil prices act on what people buy rather than on what vehicles cost. After the 2026 Middle East war began, the IEA estimated that EV drivers' running cost savings had risen by 20 to 45% by April 2026.

Sources: S&P Global Commodity Insights; Material Insights (World Bank, FRED, IMF data)

For investors

Key learnings

1. Road transport is close to half of oil demand, so EV sales in China, Europe and India are the main structural risk to long-run crude volumes.
2. Oil demand growth is moving to India and other emerging markets, so their fleet growth matters more for refiners and crude exporters than slowing Western demand.
3. High oil prices speed up electrification through running costs, as in 2026, so price spikes can weaken demand for years after they end.

What to track

• EV share of new car and truck sales: Faster uptake brings forward the plateau in road fuel demand (Monthly · national registrations; annual · IEA Global EV Outlook)
• India petrol and diesel consumption: Shows the pace of the largest source of demand growth (Monthly · PPAC)
• IEA oil demand forecast for 2030: Revisions show how fast transport substitution is advancing (Annual · IEA Oil medium-term report)

For policymakers

Key learnings

1. India's oil demand is set to grow more than any other country's to 2030, mainly from road transport, which raises its import bill and exposure to supply shocks.
2. Fuel taxes give governments a buffer against crude spikes but also make fiscal revenue depend on combustion vehicles that electrification will shrink.
3. Electrifying buses, two-wheelers and city freight cuts oil imports directly, so it is an energy security measure as well as a climate one.

What to track

• Central and state taxes per litre of petrol and diesel: Shows the fiscal buffer available in a crude spike (As revised · PPAC, oil marketing company price build-ups)
• Electric vehicle registrations by segment: Measures progress in displacing imported fuel (Daily · Vahan dashboard)

India

India is the largest source of oil demand growth to 2030, driven mostly by road vehicles, and it imports most of its crude, so fleet growth and fuel taxes bear directly on its import bill and budget.

Sources

1. Global oil shock offers boost for EV switching, fossil phaseout: IEA, S&P Global Commodity Insights (2026)
2. Global EV Outlook 2026: Outlook for electric mobility, IEA (2026)
3. India to lead global oil demand growth, add 1 mn bpd by 2030: IEA, The Week (PTI, IEA Oil 2025) (2025)
4. Price build-up of petrol at Delhi, effective 1 October 2026, Bharat Petroleum Corporation Ltd (2026)
5. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)