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Electric Cars – An Existential Threat For Oil?

Electric Cars – An Existential Threat For Oil? thumbnail

Nobody would have predicted ten years ago, back when everyone was talking about Who Killed the Electric Car, that oil would someday have to fear the future of General Motor’s EV1. Practically none of the 1,117 units were still in commission in 2006 when the movie first aired, but today there’s a whole new fleet. In fact, oil majors are worried that electric powered cars could soon replace traditional combustion engines.

Electric cars are becoming more numerous every day. This past October, EVs represented over 5 percent of energy consumption in the transportation sector. A recent study shows that EV prices are declining faster than anticipated and that oil demand could peak by 2020. This would be brought on by EVs reaching price parity with ICEs. Carbon Tracker and the Imperial College of London were quoted saying “This growth trajectory sees EVs displace approximately two million barrels of oil per day in 2025.” Such a transformation of the oil market reminds oil traders of the OPEC price war in 2014 that has led to the recent need for supply cuts, three years later.

The report published earlier this month seems quite optimistic, especially to oil majors. Shell doesn’t think demand with peak for another 5 to 15 years and Exxon gives oil till 2040. Saudi Arabia estimates they have enough oil reserves to last another 70 years. The alternative to these forecasts is grim. It could pose a serious issue for oil companies if demand were to slow.

If there’s any chance for survival, firms will need to change with the times. Shell has potential for a future, having already begun diversifying into natural gas and biofuels. Renewable energy must become a priority for these oil empires. Saudi Arabia, the world’s leading exporter of crude, could soon be known for solar panels production. Other companies will need to follow suit.

To some, such an impending shift would be beneficial. There are 194 countries that have signed the Paris Accords, aiming to reduce climate change. Further development of EVs would be extremely advantageous to participating governments. To meet these reduced carbon emission levels, the EPA has required all cars must achieve a fuel efficiency of 54 miles per gallon by 2025. President Trump has expressed an interest in potentially withdrawing from the agreement. Investors should prepare for such a decision because, if pursued, there would likely be a price jump in oil and automobile companies.

Long-term investors should consider stocks such as Tesla and General Motors, both excelling in the EV industry. Tesla’s ambitious Elon Musk ultimately plans to integrate solar panels into the roofs of cars. The advances are unending as are these company’s growth, evident in their stocks. It would be quite plausible for investors to finance these shares by shorting oil companies or the commodity itself. In the short term, oil prices are expected to rise with the ongoing supply cuts. Companies like Suncor and TransCanada have favorable conditions with their expected growth. A long-term spread using derivatives on any major oil company would be a viable option as well, capitalizing on short-term returns.

By Michael McDonald of Oilprice.com



34 Comments on "Electric Cars – An Existential Threat For Oil?"

  1. dave thompson on Tue, 7th Feb 2017 6:45 am 

    More EV pie in the sky, oh boy this will make a big difference in oil usage ballyhoo.

  2. Davy on Tue, 7th Feb 2017 7:06 am 

    I am not finding numbers to back up this claim:
    “This past October, EVs represented over 5 percent of energy consumption in the transportation sector.”

  3. Cloggie on Tue, 7th Feb 2017 8:11 am 

    Growth EV is robust in the Netherlands:

    http://tinyurl.com/jq4qnqr

    8 million cars in total.

    And it should be as in ten years time, selling cars with a fossil fuel motor will be forbidden in the Netherlands.

  4. rockman on Tue, 7th Feb 2017 9:57 am 

    Cloggie – I haven’t seen the details so a few questions. Will they still be able to drive their ICE’s? Will they still be able to buy ICE’s in other countries, like Germany, and bring them into the country? Any plans to increase motor fuel taxes significantly?

  5. rockman on Tue, 7th Feb 2017 10:04 am 

    “Electric cars are becoming more numerous every day”. Indeed there are: could hardly make out those 80+ million ICE’bought in 2016 hiding in fear in the bushes along with the existing 1.2 BILLION ICE’s. It’s really difficult to believe Big Oil till thinks there will be a market for motor fuels in a decade.

    Latest life expectancy of newly purchased ICE’s: 11 years.

  6. rockman on Tue, 7th Feb 2017 10:23 am 

    Davy – “EVs represented over 5 percent of energy consumption in the transportation sector.” And you might never: about 98 new ICE’s hit the road in 2016 for every 2 EV’s (I’m being a tad generous). So exactly does the % of energy from EV’s increase at all when amount of energy used in transportation as a whole increases more then 50 to 1 from fossil fuel burning vehicles? In fact, given how much faster the ICE fleet is growing compared to EV’s logically every year that has passed Tue % of transportation energy from EV’s would have decreased.

    IOW until EV’s comprise an increased % of the rolling fleet their portion of the energy consumption will actually diminish and not increase as the article tries to imply. The % increase of EV’s sold every year might be increasing but with some many more new ICE’s being sold the are actually becoming a small portion of the vehicles on the road.

  7. Davy on Tue, 7th Feb 2017 10:27 am 

    Thanks Rock for the clarification as ususal.

  8. Jan on Tue, 7th Feb 2017 10:28 am 

    At the moment the idea that electric vehicles will damage oil companies is fanciful.

    Thanks mainly to China , global vehicle sales has gone from 60 million to 90 million in 15 years. Of that number EVs were only 0.7 million.
    http://www.ev-volumes.com/country/total-world-plug-in-vehicle-volumes/

    In 2030 vehicles sales will be a staggering 130 million. In order to reduce oil demand EV sales would need to be between 30-40 million of that total. That is a very tall order.

  9. Kenz300 on Tue, 7th Feb 2017 10:31 am 

    Electric cars, bikes and mass transit are the future.

    Fossil fuel ICE cars are the past.

    Think teen agers vs your grand father.

    Cell phones vs land lines.

    NO EMISSIONS.. Climate change is real.

    Save money. No stopping at gas stations. No oil changes Less overall maintenance.

  10. Southwest_PA on Tue, 7th Feb 2017 10:46 am 

    Kenz, your “NO EMISSIONS” mantra is bunk. 3/4 of U.S. electricity generation is from fossil fuels, primarily coal. That sure isn’t “NO EMISSIONS”. Run your car on coal instead of gasoline and feel all green and fuzzy…

  11. Jan on Tue, 7th Feb 2017 10:52 am 

    Kenz

    The non electric model of a major manufacturer in £9,000, the electric model is £24,000.
    At average annual mileage, the ICE is far cheaper.

  12. Jan on Tue, 7th Feb 2017 10:54 am 

    Kenz

    The non electric model of a major manufacturer is £9,000, the electric model is £24,000.
    At average annual mileage, the ICE is far cheaper over 10 years.

  13. GregT on Tue, 7th Feb 2017 11:59 am 

    Not only is the ICE cheaper, the economy where people get their money from also requires the burning of fossil fuels.

    Another fine example of not being able to see the forest through the trees.

    Kenzbot 300 was in dire need of an upgrade at least three years ago. Since it began repetitively regurgitating it’s cut and paste mantra, the world has added a quarter of a billion people, 180 million new ice vehicles, and has burned over 100 billion barrels of oil, 3.5 billion tons of coal, and 350 Trillion cubic feet of natural gas.

    Kenzbot 300 is not only way overdue for an upgrade, it has now become obsolete.

  14. Simon on Tue, 7th Feb 2017 1:00 pm 

    Rockman, in the EU you can buy a car anywhere, however you need to register it locally in a set period of time (determined nationally) much like the DMV in the US

    I can purchase a Renault Zoe right now for 9k Euro 400km autonomy on the track (300 real)

    not saying/caring where the leccy comes from

  15. Cloggie on Tue, 7th Feb 2017 1:24 pm 

    Rockman asks: Cloggie – I haven’t seen the details so a few questions. Will they still be able to drive their ICE’s? Will they still be able to buy ICE’s in other countries, like Germany, and bring them into the country? Any plans to increase motor fuel taxes significantly?

    Yes, they can drive their ICE until the car is written off.

    Not sure about buying Germany and driving in Holland I would guess not since it violates the spirit of the law.

    I’m not aware of plans to increase motor taxes.

    About “ten years”…

    The current (government) policy is electric only as of 2035, or 18 years (not 10):

    https://autorai.nl/2035-elektrische-autos-verkopen/

    However, there is strong pressure to accelerate the introduction of EV. Parliament is aiming at 2025, 8 years from now.

    http://www.trouw.nl/tr/nl/5151/Vincent-wil-zon/article/detail/4279953/2016/04/12/Alle-nieuwe-auto-s-in-2025-elektrisch-Dan-pas.dhtml

    Currently only Norway is aiming at 2025. And, surprise, surprise, India has similar plans.

    But… everybody was surprised here when the Dutch public ordered 325,000 Tesla’s Model 3 in one single week!!! The car will be delivered in 18 months!

    And then there is the Chevy Bolt with spectacular specs. All of a sudden everybody here wants an EV.

    In other words, it is very well possible that the Dutch public will make a mockery of not yet existing Dutch legislation and anticipate on a electric future.

    And hey, the American car industry is back in Europe!

  16. Cloggie on Tue, 7th Feb 2017 1:30 pm 

    To illustrate the spectacular development in Holland, here car sales figures:

    http://www.autoweek.nl/verkoopcijfers/

    2016: 385.259

    So you can imagine how spectacular a development this ordering of 325,000 Tesla’s is within a single week.

    It simply means that the era of the ICE will be over very soon. Legislation or no legislation. The Dutch public is changing behavior faster than Dutch politicians can change the law.

    Green is sooooooh sexy.

    Image is everything.

    Oh and the environment of course.lol

  17. rockman on Tue, 7th Feb 2017 1:38 pm 

    Thanks Cloggie. It seems obvious that for EV’s to ever have a global impact the big vehicle demand centers (US, China, India, etc) are going to require govt intervention on a very serious level. While the Dutch plan will help the Dutch down the road it won’t help the rest of the world.

  18. Cloggie on Tue, 7th Feb 2017 1:46 pm 

    And what is going to power these EV’s?

    http://www.trouw.nl/tr/nl/4332/Groen/article/detail/4433967/2016/12/14/Noordzee-is-het-Dubai-van-de-windmolens.dhtml

    Noordzee is het Dubai van de windmolens

    No translation necessary I think (hope).

    The Netherlands is 44,000 km2 (“Kentucky”).
    The Dutch part of the North Sea is 57,000 km2.

    All shallow water and a spectacular 10 m/s pretty consistent wind speed.

    A large 5 MW wind offshore turbine generates the equivalent of 88 barrel of oil per day.

    Shell and van Oord were awarded to build the new large offshore wind parks Borssele III/IV against a spectacular low price of 5.45 euro cent/kwh (world record). Government subsidy: only 1 cent/kwh.

    When oil prices as expected will increase after 2020, no subsidy will be necessary anymore.

    The secretary of economic affairs and driving force behind the wind boom in Holland Henk Kamp had 8 billion euro in his pocket for subsidies. He managed to spend 1.4 billion so far and that will probably it.

    In Dubai the price for solar kwh halved recently.

    In the North Sea a similar development is going on.

  19. twocats on Tue, 7th Feb 2017 1:50 pm 

    I am not finding numbers to back up this claim:
    “This past October, EVs represented over 5 percent of energy consumption in the transportation sector.”

    Davy, i think what they mean by energy is electricity. So EVs are 5% of electricity consumption in the transportation sector. They are heavily competing with revived downtown electric trollies and disneyland rides.

  20. Cloggie on Tue, 7th Feb 2017 1:57 pm 

    It seems obvious that for EV’s to ever have a global impact the big vehicle demand centers (US, China, India, etc) are going to require govt intervention on a very serious level. While the Dutch plan will help the Dutch down the road it won’t help the rest of the world.

    What measures?

    Dutch government information regarding Evs:

    http://www.rvo.nl/onderwerpen/duurzaam-ondernemen/energie-en-milieu-innovaties/elektrisch-rijden/aan-de-slag/financiele-ondersteuning

    – no road tax for EV
    – no “BPM” tax EV

    BPM is the lump sum tax you pay when you buy a new car. CO2 is the only determining factor these days:

    https://www.automotiveimport.nl/bpm-2/bpm-2016-hier-zijn-de-nieuwe-bpm-tarieven-voor-2016

    Het tarief voor 2016 is vastgesteld op € 86 per gram CO2 uitstoot vanaf 67 gram per kilometer.

    The first 67 gram CO2/km are free, added with 86 euro per gram on top of that. For an average boring Opel Astra Joe Sixpack car of 120 gram that means a BPM of 53 x 86 = 4558 euro BPM

    I would assume that these kind of rules apply everywhere, more or less, so I would not want to push the Dutch as the new exceptionalists here.lol

  21. Davy on Tue, 7th Feb 2017 2:00 pm 

    Gotcha TwoCats! LOL

  22. rockman on Tue, 7th Feb 2017 2:17 pm 

    Jan – If I may I’ll modify your statement: 2030 vehicles sales will be a staggering 130 million. In order to reduce THE INCREASE IN oil demand EV sales would need to be between 30-40 million of that total. But in total terms we’ll still be adding 90 – 100 million ICE in 2030. Which means that even if EV’s reach that level of sales in 2030 there will be significantly more ICE’s on the road in 13 years then there are today.

    Increasing EV sales are replacing just some of the future ICE sales. But they aren’t replacing all of them. So even if that optimistic expectation of EV sales is reached it still means many hundreds of millions of new ICE’s will be added to the global fleet. IOW we’ll still be increasing transportation GHG production but just not as quickly. And understand: that’s with EV sales increasing 20+ times the current sales rate.

    You want a truly tall and meaningful tall order that will alter the path we’re: ever ICE replaced next year and every year going forward is replaced by an EV. And every first time vehicle buyer gets an EV. But as ridiculous as that might be it still won’t reduce GHG emissions very quickly because next year we’ll still have more the 1.2 BILLION ICE’s on the road.

    When you look at the actual dynamics underway and go to the bottom line EV’s are doing nothing to HALT let alone REVERSE the fossil fuel powered transportation systems.

  23. Cloggie on Tue, 7th Feb 2017 2:17 pm 

    http://www.trouw.nl/tr/nl/5151/Vincent-wil-zon/article/detail/4238416/2016/02/05/Megamolen-staat-met-zijn-rug-in-de-wind.dhtml

    US Sandia National Laboratories is working on the design of a 50 MW offshore wind turbine with blades of 200 m. The rotor is mounted downstream and allows for buckling at higher wind speeds.

    https://www.youtube.com/watch?v=RQmA7JwBefY

    http://www.sandia.gov/news/publications/labnews/articles/2016/22-01/wind_blades.html

  24. Anonymous on Tue, 7th Feb 2017 7:23 pm 

    EV’s would not damage OIL sales anywhere near as much as its proponents claims, since EVs are entirely reliant on OIL, for their production, support, distribution, and disposable. All of an EVs sub-components, are of course, needless to say, also 100% dependant on OIL, and or as a feedstock for their manufacture.

    The uS oil cartel has made their peace with a few token EVs running about. They are not overly concerned EVs will shut down the uS oil cartel anytime soon however. A generalized collapse of mass motoring will likely occur long before EVs ever get a chance to rise to the top of big oil’s worries.

  25. rockman on Tue, 7th Feb 2017 9:41 pm 

    “The uS oil cartel has made their peace with a few token EVs running about.”

    What’s an EV???

  26. Anonymous on Tue, 7th Feb 2017 10:25 pm 

    Are you trolling rockerman, or just being your usual self? So hard to tell these days….

  27. Jan on Wed, 8th Feb 2017 5:48 am 

    A large 5 MW wind offshore turbine generates the equivalent of 88 barrel of oil per day.

    Cloggie

    Can you point out a single turbine that works at maximum capacity 24 hours a day 365 days per years?
    The 7,000 wind turbines in the U.K. produce the equivalent of 62,000 barrels per day.
    Which is around 9 barrels per turbine. Most of these turbines are 3-4MW.
    The U.K. uses 1,500,000 barrels of oil per day. So U.K. would need 50,000 turbines to power a third of it’s vehicles.
    So your figures are way off.

  28. Jan on Wed, 8th Feb 2017 6:03 am 

    Rockman

    Yes you are correct there will be more ICE vehicles on the road in 2030.
    I was quickly trying to work out how many EV sales would have to occur to stop oil consumption increasing. If we take into account scrappage of older less efficient cars and the 90 million using less fuel. All the vehicles sold over the current 90 million ICE would have to be pure electric.
    I.E. 3 million next year, 6 million in 2019. 9 million in 2020 etc.
    In the UK a pure electric cost double the same size and make petrol. Most people simply do not have that money.

  29. Davy on Wed, 8th Feb 2017 6:11 am 

    Bravo Jan!

  30. Kenz300 on Wed, 8th Feb 2017 12:31 pm 

    Battery costs get cheaper every year driving down the cost of electric vehicles. The future is electric. No emissions.

    Renewables Provide Majority of New US Generating Capacity through November 2016
    http://www.renewableenergyworld.com/articles/2017/01/renewables-provide-majority-of-new-us-generating-capacity-through-november-2016.html

    How Exxon & The Koch Brothers Have Funded Climate Denial – YouTube
    https://www.youtube.com/watch?v=qXm6ihnWN4A

  31. Harquebus on Wed, 8th Feb 2017 8:38 pm 

    They can try to build all the EV’s they like. With out diesel powered trucks, they ain’t gonna do anything.

  32. Cloggie on Thu, 9th Feb 2017 2:12 am 

    The electric car is the next PC.

    http://www.trouw.nl/tr/nl/4332/Groen/article/detail/4452330/2017/01/24/Elektrische-auto-wordt-de-pc-van-de-komende-jaren.dhtml

    The Chinese are already able to produce a small electric vehicle for 4500 euro.

    When I bought my first “IBM-compatible PC” (a Philips) in 1985 the price was 4500 guilders (that’s 4500 euro now).

    It ain’t sexy but will bring you from A to B:

    https://www.youtube.com/watch?v=c4pqj6Ot-Tk

    Electro-motors are FAR, FAR simpler than combustion engines, that’s why this spectacular price decrease is possible in the first place. The electromotor is almost maintenance free and lasts much, much longer than that condensed package of violence known as the combustion motor.

    In China they have 500,000 of them now driving around.

    The latest development is the LSEV:

    https://www.youtube.com/watch?v=VuO9lqgsJc0

    Speed: 60 kmh (40 mph). There are meanwhile hundred very local companies producing them.

  33. Davy on Thu, 9th Feb 2017 6:18 am 

    LSEV: We don’t need high speed trains. These are an arrangement with no future. We need slow trains and slow cars. We make our wonderful vacations getting there quick and then we are bored or wish we were home. There is an insanity to satisfying ourselves with speed. We get our food quick only to get indigestion. We rush through some of those events with the highest of value only to get nowhere in emptiness. We multitask only to botch up what we are doing in multiple ways. Sometimes we get killed on the road going too fast and multitasking.

    I have been advocating (SLOW) now for years. We don’t need type “A” people who are driven to over succeed and in the process move life along at twice the speed it should. Speed has a place but more often than not it is a discretionary satisfaction. We don’t have that luxury anymore and what is sad is we do not have the macro wisdom to say no to this civilization wide phenomenon. No is of course incompatible with modern liberal democracy and market based capitalism that is market driven techno optimism of Yes. Faster out competes slow almost always. A slow society is consumed by a fast one and it is called progress. We have the domination of the human discretionary by the pursuit of more. Sometimes efficiency is involved with more with the less. Often it is outright bliss of more with more. This modern condition contains 3 of the deadly sins of man, lust, gluttony, and greed. The same results occur with our fake green desire for more with less or more but clean. This ends up being more in the end if you have a modern civilization without the moral compass of no.

    As long as people’s desires and emotions drive our choices we are not going to make the necessary changes to lifestyle and attitudes. Mind you even if we change these vital elements of our life system it is too little too late to save us. It is not too late to change attitudes and lifestyles to allow us to adapt and mitigate the worst of what is coming. A system that is built to run fast and then slows down is heading for destruction. Wisdom says when you are at limits you slow down. Wisdom also says when you are screwed acknowledge it and don’t make it worse. We are screwed when modern civilization slows down so let’s build hospices and lifeboats. These two elements of life epitomize slow.

  34. Cloggie on Thu, 9th Feb 2017 7:00 am 

    Jan says:Cloggie
    Can you point out a single turbine that works at maximum capacity 24 hours a day 365 days per years?
    The 7,000 wind turbines in the U.K. produce the equivalent of 62,000 barrels per day.
    Which is around 9 barrels per turbine. Most of these turbines are 3-4MW.
    The U.K. uses 1,500,000 barrels of oil per day. So U.K. would need 50,000 turbines to power a third of it’s vehicles.
    So your figures are way off.

    No they are not:

    https://deepresource.wordpress.com/2017/01/07/gold-mine-north-sea/

    Location is everything.

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