How many electric vehicles are needed to fill this oil market gap?

The Middle East energy crisis is quietly rewriting the demand logic for electric vehicles.

According to information from ZhuiFeng Trading Desk, in a report dated March 30, UBS said the Strait of Hormuz blockade has cut off about 12% of the world’s oil supply. To fully make up for this shortfall, it would be necessary to replace all about 770 million gasoline vehicles with electric vehicles—amounting to nearly twice the historical cumulative global EV fleet.

Sustained high oil prices will systematically improve EVs (electric vehicles) and PHEVs’ (plug-in hybrid electric vehicles) total cost of ownership (TCO) versus gasoline vehicles across their full life cycles, thereby triggering a round of structural demand growth that exceeds market expectations. For lithium and other battery raw materials, this means that a potential medium- to long-term demand inflection point is starting to build.

A historical mirror: How the 1973 oil-price shock reshaped the auto landscape

In its research report, UBS first cited the historical precedent of 1973. That October, the Arab Petroleum Exporting Countries Organization (OAPEC) announced a comprehensive oil embargo against countries supporting Israel. Although the embargo lasted only about six months, oil prices surged by nearly 300%, driving a profound structural reshaping across the energy and auto industry supply chains:

Policy level: Governments across countries introduced fuel-efficiency standards in succession, built strategic petroleum reserves, and rolled out incentive policies to reduce reliance on oil;

Vehicle manufacturers: Car makers that had previously ignored fuel economy were forced to rapidly transform, with fundamental changes to vehicle design and model strategies;

Consumer level: The sharp jump in gasoline prices deeply altered car-buying decisions, making fuel efficiency a core consideration.

UBS emphasized that many of the above changes proved to be durable—continuing even after the embargo was lifted. This provides a highly referential historical framework for the current energy crisis.

Math problem: How many electric vehicles are needed in the end?

UBS constructed an intuitive yet startling quantitative framework. Based on the current situation:

The Strait of Hormuz disruption has already caused a global oil supply interruption of about 13 million barrels per day (13Mbpd), accounting for roughly 12% of total global supply;

According to data from the International Energy Agency (IEA), the global passenger-vehicle fleet accounts for about 25% of global oil demand—approximately 27 million barrels per day (27Mbpd);

Assuming that among the world’s roughly 1.6 billion vehicles, gasoline vehicles (ICE) make up about 94%, this implies that about 770 million gasoline vehicles would need to complete electrification to fully fill the current oil supply shortfall.

This is clearly a purely theoretical assumption. In reality, constraints such as demand elasticity, supply bottlenecks, and substitution effects make it fundamentally impossible to achieve.

But even if you only solve 50% of the gap, it would still require an incremental 385 million electric vehicles—which is almost the same as UBS’s prediction that cumulative EV sales will reach about 400 million by 2035.

Google search hits a historical high, but sales haven’t caught up

Real-world data presents a picture of “emotion leading, action lagging.”

Google Trends shows that global search interest for “Electric Vehicle” has reached the highest level ever (the index is 100), reflecting that consumer interest in electric vehicles is at a historical peak. However, actual EV sales data at the start of 2026 has been relatively subdued, and the two have diverged clearly.

In terms of regional distribution, China is still the world’s largest EV market, accounting for 61% of global sales over the last nearly 12 months; Europe 21%; North America 9%; Asia (excluding China) 6%; and other regions 3%.

UBS’s current global auto team forecast that global EV demand growth in 2026 will be about 9%. While this is still relatively steady, it is clearly lower than the growth rates of the previous few years. In the Chinese market, weak consumption in the period after stimulus policies may limit upside room for incremental growth. And with low-cost EV exports from China into markets where oil prices are high, the TCO advantage is becoming increasingly significant.

Inventories continue to be worked down, and battery energy-storage pipelines are strong

The upstream lithium market is also sending positive signals.

UBS said that after China’s inventory of lithium carbonate fell significantly by the end of 2025, early 2026 saw a brief pause in the decline. But after the Spring Festival, it returned to a liquidation (de-stocking) trajectory. At present, total inventory across the whole chain remains at a low level of less than 1 month (for lithium carbonate monthly and weekly inventories, and for lithium hydroxide monthly inventories as well). The tightness of the supply chain is evident. UBS estimates the current pace of inventory liquidation is about 25k tons of lithium per year.

Meanwhile, the advancement momentum in the battery energy storage system (BESS) sector is strong, further supporting the outlook for lithium demand.

The global BESS project pipeline from 2026 to 2030 has a total scale of about 2.1 terawatt-hours (2,077GWh), covering every stage from project proposals to construction/operation. By region, China accounts for 45%, North America 18%, and Europe and Oceania each 12%. The average project duration is expected to exceed 4 hours by 2029.

UBS concludes that in the short term, the demand shock and cost pressure brought by current geopolitical conflicts are difficult to ignore. But for investors with longer investment horizons, the energy crisis may drive the EV theme into a structural demand upswing, thereby delivering tangible benefits to upstream materials such as lithium.

The精彩 content above comes from ZhuiFeng Trading Desk.

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