Does the Rise of Electric Vehicles Reduce the Long-Term Elasticity of Oil Demand? Evidence from Major Global Markets (1995–2024)

Objectives This study examines whether the diffusion of electric vehicles has altered the long-term price elasticity of oil demand in major global markets over the period 1995–2024. It specifically investigates whether the post-EV period is associated with structural changes in oil demand responsiveness and whether EV adoption moderates the relationship between oil prices and oil demand. Materials and Methods The analysis uses a dynamic panel framework and distinguishes between the pre-EV period, 1995–2009, and the post-EV period, 2010–2024, to identify structural changes in oil demand behaviour. Panel cointegration tests are employed to examine the existence of long-run relationships among the variables. System GMM estimation is then used to address demand persistence, potential endogeneity, and dynamic adjustment in oil demand. The empirical specification incorporates oil prices, EV adoption, and relevant macroeconomic controls. Results The results show that oil demand remains highly persistent over time but responds negatively to changes in oil prices. The findings indicate that long-run price elasticity increases substantially in the post-EV period, suggesting that oil demand has become more responsive to sustained price changes after the diffusion of EVs. However, within the post-EV period, EV adoption is found to reduce oil demand directly while moderating the contemporaneous price sensitivity of oil demand. Conclusion The findings suggest that EV diffusion affects oil demand through two complementary mechanisms: a structural increase in long-run price responsiveness across periods and a within-period moderating effect on the oil price–demand relationship. Overall, the rise of electric vehicles is associated with a meaningful transformation in global oil demand dynamics, with important implications for energy policy, oil market forecasting, and long-term demand planning.