EV Demand Growth Slows; Refiners Lift 2026 Gasoline Outlook as Internal Combustion Proves Resilient

The narrative of an imminent electric vehicle takeover is colliding with a more complicated reality, and oil refiners are taking note. Major US and European refining companies have quietly revised their 2026 gasoline demand outlooks upward over the past quarter, citing slower-than-expected EV adoption, robust hybrid sales, and an aging internal combustion fleet that is being driven harder rather than scrapped.

Global EV sales rose 18% in the first quarter, a strong number in absolute terms but well below the 35% growth rate recorded as recently as 2023. In the United States, full battery electric vehicles accounted for 8.4% of new car sales, only modestly above 2024 levels. European registrations slipped after the German government wound down purchase subsidies, while Chinese growth, though still robust, has shifted decisively toward plug-in hybrids that consume both electricity and gasoline.

Marathon Petroleum, the largest US refiner by capacity, told analysts on its latest earnings call that it now expects American gasoline demand to remain above 8.9 million barrels per day through 2027, roughly 200,000 bpd higher than its 2024 base case. Valero Energy made similar comments, while Phillips 66 said it was deferring previously announced plans to convert part of its Rodeo, California refinery to renewable diesel because gasoline crack spreads remain attractive. European refiners including TotalEnergies and Repsol echoed the shift, with Repsol citing strong Iberian demand and slower fleet turnover in southern Europe.

Several structural factors explain the revision. First, US light vehicle sales have averaged 15.8 million units annually, well below the pre-pandemic peak, meaning the fleet is replaced more slowly. Second, the average age of US passenger vehicles has climbed to 12.6 years, an all-time record, and gasoline-powered cars built in the 2010s remain on the road far longer than originally projected. Third, hybrid vehicles, including from Toyota, Honda, and Hyundai, are gaining share at the expense of pure battery models, sustaining gasoline demand even as new car buyers electrify.

Charging infrastructure constraints are also a factor. Despite billions in federal funding through the Bipartisan Infrastructure Law, only a fraction of planned highway fast chargers have been built. Range anxiety and elevated EV sticker prices, exacerbated by tariffs on Chinese batteries and electric vehicles, have pushed many American consumers toward hybrids as a transitional choice. Even Tesla, the EV market leader, reported a year-over-year decline in unit deliveries in two consecutive quarters.

The implications ripple through the energy complex. Gasoline crack spreads on the Gulf Coast have held above $20 per barrel, supporting refining margins and discouraging closures. OPEC's World Oil Outlook now sees global oil demand peaking later than the International Energy Agency, a divergence that has implications for refinery investment decisions across the Atlantic Basin.

None of this means the energy transition is over. EV sales are still growing, battery costs continue to fall, and policy support remains strong in many jurisdictions. But the path is proving bumpier than the smooth S-curve some forecasters drew. For refiners, the message is straightforward: gasoline is not going away as quickly as feared, and the cash flows of 2026 will reflect that reality.