The emergence of electric vehicles (EVs) is cutting into oil consumption, says Erik Norland, chief economist of CME Group
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Crude oil prices are currently low despite oil tankers taking detours to their destinations due to technological advancements in the automobile sector, a top CME Group official has said. Rates of agricultural commodities are also depressed in sync with crude oil.
“Despite the current geopolitical tensions, crude oil is trading low. Oil tanker traffic via the Suez Canal and the Red Sea is down 85 per cent from a few years ago. The emergence of electric vehicles (EVs) is cutting into oil consumption,” Erik Norland, chief economist of CME Group Inc. said.
Addressing the final session of Soy Connext 2025, organised by US Soybean Export Council (USSEC), Norland said the fuel efficiency of vehicles per car has improved by 3 per cent on average over the past few years.
“We are using only half the fuel that we used in the past 50 years. People are driving the same distance as they did in 2019. OPEC (Organisation of Petroleum Exporting Countries) has decided to increase production, not wanting to lose share by 3 million barrels a day. Fracking in the US has made it self-sufficient to meet oil demand,” he said.
EV sales
Sales of EVs in China make up 51 per cent of total vehicle sales. EVs made up 11.5 per cent of total vehicle sales in 2024 across the globe. The cost of solar power has declined by 60 per cent and lithium prices have dropped 98 per cent from peak, he said.
Currently, the West Texas Intermediate crude oil is quoted at $63.782 a barrel and Brent crude oil is at $67.919. The energy commodity prices are holding on to last week’s gain as investors weigh supply risks and the US easing its monetary policy.
Stating that the transformation in the energy infrastructure has led to tardy demand growth, Norland said, however, demand for AI will likely rise to between 6.7 per cent and 12 per cent of the demand by 2028 from the current 4.4 per cent.
Crude oil, following Chinese growth with a one-year lag, and the same holds good for prices of corn, soyabean and soyabean oil, a top CME Group official has said.
Slowing Chinese growth
“This has been happening since 2010. The Chinese economic growth has slowed down. With real data are not available, you can see that these markets are following Chinese growth with a year’s lag,” said Norland.
He said the Chinese debt levels have soared, and the debt as a percentage of GDP has increased manifold since 2008.
Erik Norland, chief economist of CME Group Inc.
Sync with corn, soy
The building sector’s share in the Chinese economy is 30 per cent, but the problem currently is that real estate prices are falling. At least 68 per cent of the Chinese network is in primary residence.
The Chinese economy is contracting sharply due to low growth, with retail sales declining by 10-20 per cent, said Norland. Though industrial production is good, there was problem in selling them, he added.
On the other hand, prices of crops such as corn and soybeans are moving in tandem with crude oil. “Their prices are depressed like crude oil. The agriculture market is closely linked with crude oil due to the intensive nature of farming and biofuels,” said Norland.
Import surge in Q1
The import duty hike proposal of US President Donald Trump will increase tariff revenue, he said. However, the higher duty paid by foreign exporters will be passed on to the US consumers.
Pointing out the surge in US imports in the first quarter, he said it was done to manage the higher tariffs proposed by the Trump administration. But the core inflation in the US is more like the 1960s and early 1970s, when inflation surged.
“Automobile loan defaults have increased to the highest since 2010-11, and inflation was rising. This has resulted in investors turning to assets such as gold, silver, bitcoin, platinum and palladium. “Equities have rarely had such a high valuation,” said Norland.
In his closing remarks, Jim Sutter, CEO of USSEC, said the global trade is changing, and it is hard to look above and ahead of the noise in the markets now.
(The writer was in the US at the invitation of USSEC.)
Published on August 25, 2025