Despite high pump prices pushing consumers to reduce spending -- and renewing calls for the U.S. to reduce its dependence on imported oil -- gasoline and diesel will continue to be the dominant fuels in passenger transport at least until 2040, according to forecasts from Exxon Mobil (XOM) and British Petroleum (BP).

Both companies released projections for the next two to three decades, and forecast that electric cars and hybrids will make up 4% to 5% of the global fleet even after decades of development. These forecasts are at odds with projections by independent consultants like McKinsey and government targets, which see electric vehicles taking on a much bigger role in transportation in the future.

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Future expectations

According to BP CEO Bob Dudley, who released the company's statistics review a couple of weeks ago, 87% of the transport fuel used in 2030 will be petroleum-based, and oil will continue to be the dominant power source. Biofuels, natural gas and electricity will supply the rest of the energy needs. And by that time, electric vehicles and plug-in hybrids will constitute about 4% of all vehicles, according to the company.

Competitor Exxon Mobil held a starker view, pointing out that higher costs of electric vehicles would mean that their sales would not show much growth even in the 2030s and that, by the end of 2040, only about 5% of all vehicles would run on electricity, natural gas or hybrid plug-in technology. The forecasts, however, do not consider breakthroughs in battery technology that can reduce the cost of manufacturing electric vehicles.

Despite the dominance of oil-driven cars, the forecasts predict a peak in oil demand in the 2020s because of stringent fuel efficiency standards and rising biofuels production. However, this could be countered by higher aviation and commercial vehicle usage.

Impact on oil prices

Along with pressures to meet growing demand from developing Asian countries, the oil industry is facing difficulties in adding capacity while also covering for the natural decline seen in existing fields. Strong demand kept crude oil benchmarks above the $100-a-barrel mark for most of 2011, despite multiple economic shocks. Oil companies earn a large chunk of their value from the production of crude oil. With limited alternatives, prices will continue to increase in the future with rising demand constraining reserves.