Goldman Sachs Group Inc. has released a report warning that accelerating global electric vehicle (EV) adoption could significantly offset oil demand by late next year. The investment bank outlined that under a 'Persistent Acceleration' scenario, where growth follows the February to May trajectory, oil demand could be reduced by 320,000 barrels per day by December next year. This projection highlights the increasing pressure EV sales are placing on traditional fossil fuel consumption markets.

The report detailed that EV car sales in the market increased by 3.4 percentage points in May, bringing EVs to account for 26.1% of total sales in the global market. In contrast, if there is no growth in EV sales, the study outlined that demand for oil in the global market could still take a hit of around 130,000 barrels per day by December next year. The data suggests a structural shift in transportation energy preferences regardless of the pace of EV adoption.

Impact of Two- and Three-Wheelers

The analysis also noted the significant contribution of two- and three-wheeler EVs, which accounted for a majority of sales in markets like India and Vietnam. According to the note, these vehicles could offset about 'one-third to one-half' of the fuel that four-wheeler EVs can. This segment is particularly crucial in developing economies where smaller vehicles dominate the transportation landscape.

Regional Sales Performance

EV sales in the U.S. reached a record high in May, with preliminary numbers showing 85,000 units sold. The average EV transaction price was $54,532, a 4% YoY decline from May 2025. This growth occurred despite President Donald Trump ending the $7,500 Federal EV Credit. Tesla Inc. CEO Elon Musk stated that Tesla's sales increased after the end of the Federal EV credit, countering allegations that his businesses benefited from government subsidies.

Oil Demand Outlook

According to a report by the Energy Information Administration (EIA) published June 9, the agency expects global oil demand to decrease by an average of 1.1 million barrels per day in 2026. However, the EIA anticipates a rebound sometime next year by 2.5 million barrels per day in 2027, reaching 105.3 million barrels of oil every day. Investor Ross Gerber of Gerber Kawasaki suggested that spikes in gas prices, potentially driven by geopolitical tensions, would lead people to choose EVs over gas vehicles, benefiting companies like Tesla.

Gas prices in the U.S. have dropped to a six-week low, offering relief to motorists as the national average for regular gasoline fell to $3.93 per gallon. According to the American Automobile Association (AAA), the current price reflects a decline of 14.1 cents over the last week. Diesel prices also decreased significantly, falling 19.2 cents to $4.99 per gallon. The downward trend correlates with a recent drop in crude oil prices, with West Texas Intermediate (WTI) trading at $73.59 per barrel and Brent crude at $77.53 per barrel.

GasBuddy analyst Patrick De Haan highlighted the sustained decline in a post on X, noting that the national average has now fallen for six consecutive weeks. While the drop in prices provides a respite for consumers, De Haan warned that uncertainty surrounding the Strait of Hormuz could slow the pace of the decline. He indicated that while prices may not reverse immediately, the rate of decrease could face headwinds if supply chain concerns escalate in the region.

Geopolitical developments in the Middle East remain a focal point for energy markets. Iran's Parliament Speaker, Mohammad Bagher Ghalibaf, stated that Iran would administer the Strait of Hormuz following talks in Switzerland, asserting that the situation cannot return to the pre-war status quo. However, Esmaeil Baqaei, a spokesperson for the Iranian Foreign Ministry, denied reaching a new agreement with the U.S. regarding International Atomic Energy Agency (IAEA) inspections. The UK Maritime Trade Operations Center (UKMTO) has not reported any recent incidents or suspicious activity in the Strait.

Current Energy Prices

The United States Oil Fund (USO) was trading at $111.65 during pre-market trading on Tuesday. Despite the overall national decline, gas prices remained above $5 per gallon in Pacific states such as California and Washington. Market participants continue to monitor the Strait of Hormuz closely, as any disruption there could impact the recent trajectory of falling fuel costs.