EV Emergence is Ominous for Oil, Car Makers

May 18, 2023

EV transition about to cut into oil markets in a huge way.

Yahoo Finance:

The rise of EVs presents a threat to the oil industry as EVs do not require oil as their primary fuel source. According to the International Energy Agency (IEA), transportation accounts for around 60% of global oil demand, and the rise of EVs could significantly reduce this demand. Per BloombergNEF estimates, EVs on the roads are displacing 1.5 million barrels of oil demand per day. Electric cars are expected to displace around 2.5 million barrels of oil demand daily by 2025.BNEF estimates that electric and fuel cell vehicles will displace 21 million barrels per day in oil demand by 2050.

Some industry watchers and economists view EVs as the archnemesis of the oil industry. For instance, Stanford University economist Tony Seba is of the view that EVs will destroy the global oil industry by 2030. Akshat Rathi from Bloomberg News went on record claiming that “every F-150 Lightning destroys 50+ barrels of oil demand forever.” In 2016, Bloomberg predicted EVs to trigger a global oil crisis.

While there’s no denying that rapid EV momentum is set to hurt the oil industry’s prospects, things don’t look as appalling now as predicted by some analysts and economists.

New interview with futurist Tony Seba has dire warnings for traditional car makers.

The Driven:

Seba recently returned from the Shanghai auto show and The Driven asked him how the Shanghai show compared to the LA auto show in December last year.

On the LA auto show Seba said: “Frankly it was pathetic. There were a handful of electric vehicles. Most of them are expensive. Many of them were not even for sale. I just came back from Shanghai. And what I saw was amazing. I mean, just the sheer quality for the cost of the EVs that Chinese automakers are producing is just stunning.

“And also there are so many automakers in China that are achieving scale. This year EVs may well achieve 40 to 50%.

“What you’re gonna see over the next few years is most foreign automakers being pushed out, not Tesla, but most other automakers pushed out of the Chinese markets just because of economic reasons, just because they don’t have products at the right cost and capability for the Chinese markets.”

Seba says that most analysts and policymakers see the EV disruption as a “clean caterpillar” rather than a new butterfly. It’s seen as a “one is to one” transition where every ICE vehicle is simply replaced with an EV.

Seba says this isn’t how disruption happens.

“The day that we get level four, autonomous technology ready and approved by regulators, when that converges with on-demand, and electric transportation we will get what we call transportation as a service (TAAS).”

“Some call it Robo taxi. Essentially, when that happens the cost per mile of transportation is going to drop by anywhere from 10 to 20 times.”

“So even if gasoline automakers gave away their cars, that’s still gonna be a lot more expensive than the cost of transport as a service.”

“So for most people who can barely pay their bills, it won’t make any sense to own a car,” said Seba.

“Do I spend $50,000 over the next five years to own a car? Or do I pay $100 a month for a subscription to transportation as a service?”

Global annual auto sales to drop by 75% by 2030

Seba says that electric vehicles will do around 500,000 miles (800,000 km) compared to ICE vehicles that get around 140,000 miles (225,000 km) over their lifetime.

This means that EVs will last 4-5 times longer meaning the global car market will likely drop by 75% because people won’t need to replace cars as often.

“People are going to be buying vehicles a lot less often. So with that, essentially cut the global vehicle market by a factor of four or five.”

“And soon enough you’re gonna see million mile EVs. And what that means is that over 10 years you’re going to need just one EV for 10 petrol cars,”

“Either way, it’s pretty much over for internal combustion engine.”

Yahoo again:

The oil industry is already taking steps to adapt to the rise of electric vehicles. Many companies are investing in renewable energy, such as wind and solar power, to diversify their portfolios and reduce their carbon footprints.

For instance, BP plc BP has set a target of becoming a net-zero company by 2050 and plans to invest $5 billion per year in low-carbon energy by 2030.The integrated company intends to invest in and create its renewable energy generation capacity of 20 gigawatts by 2025. In February, it announced plans to invest $1 billion in EV charging stations across the United States by 2030.EV charging is one of BP’s five strategic transition growth engines, wherein the company expects to grow investment over the next 10 years. BP currently offers 22,000 EV charge points worldwide and aims for more than 100,000 by 2030, with 90% of those being quick or ultra-fast. BP has also invested $7 million in IoTecha, in sync with its objective to provide more than 70,000 public EV charging points worldwide by 2030.

Oil companies are also exploring new business models, such as offering charging infrastructure and battery storage solutions to EV owners. Shell plc SHEL, Europe’s largest oil company, is investing in a network of fast-charging stations across Europe. Early this year, the company inked a deal to acquire Volta, in a bid to diversify from oil and invest in green energy management. It bought Greenlots — another company involved in EV charging and management — in 2019 and ubitricity — U.K.’s largest EV charging network — in 2021.   Shell also has the same ambitious target of becoming a net-zero emissions energy player by 2050 or earlier. By 2030, the integrated energy company plans to lower absolute emissions by 50%.

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4 Responses to “EV Emergence is Ominous for Oil, Car Makers”

  1. rhymeswithgoalie Says:

    There are so many other wins for getting right of the fossil fuel industries that have nothing to do with GHGs. Besides all of the environmental destruction on the extraction side, there’s damage to humans (and historic artifacts) in cities.

    I love love love to hear about pollution-prone cities getting rid of their SOx and NOx and noise and heat spewing vehicles, starting with those “rickshaws” and puttering two-wheelers, especially since the health of the poor is the biggest win.

  2. rhymeswithgoalie Says:

    “Do I spend $50,000 over the next five years to own a car? Or do I pay $100 a month for a subscription to transportation as a service?”

    There’s a high threshold to starting a transportation business that relies on automated vehicles. You can go a long way with human-driven electric cabs and shuttles.

  3. jimbills Says:

    ‘Seba says this isn’t how disruption happens.

    “The day that we get level four, autonomous technology ready and approved by regulators, when that converges with on-demand, and electric transportation we will get what we call transportation as a service (TAAS).”

    “Some call it Robo taxi. Essentially, when that happens the cost per mile of transportation is going to drop by anywhere from 10 to 20 times.”

    “So even if gasoline automakers gave away their cars, that’s still gonna be a lot more expensive than the cost of transport as a service.”

    “So for most people who can barely pay their bills, it won’t make any sense to own a car,” said Seba.

    “Do I spend $50,000 over the next five years to own a car? Or do I pay $100 a month for a subscription to transportation as a service?”’

    Here is a very likely partial list of why this isn’t as simple as Seba makes it out to be:

    1. Self-driving technology isn’t yet working flawlessly anywhere, and is well behind earlier estimates of its readiness, raising questions if the technology is actually close to surpassing the capability of human beings in the near future.

    2. We already have TAAS. It’s called Uber, and it’s been available for over a decade. It hasn’t taken over the privately-owned vehicle market even in very congested urban centers. Seba would make the point that a ride-share TAAS system based on self-driving EVs would be cheaper than Uber is now. This is likely true, but as yet there are no examples for comparison. Uber is already cheaper than owning a car in many cases:
    https://www.rocketmoney.com/learn/personal-finance/how-expensive-is-uber

    3. The TAAS model would work best in urban centers. It is highly doubtful that it would work as well in suburban and rural areas.

    4. There aren’t any services now that are 100% reliable, which is what a 100% TAAS system would have to be for people to get to places, especially work, on time. If it’s not 100% reliable, there’s no way 100% of consumers will use the TAAS system instead of owning their own vehicles, whatever the cost.

    5. People aren’t the logical machines that Seba and libertarians take them to be. Owning a car is a status symbol. People are social animals, and status is a core impulse for most people. Private car ownership isn’t going away, whatever (and perhaps because of) the cost:
    https://stevengambardella.medium.com/why-poor-people-drive-expensive-cars-a19083360b05

    6. Seba isn’t being entirely honest in his calculations, because a car owner also still has a vehicle worth a lot of money after 5 years, whereas a TAAS consumer would have nothing.

    Seba’s vision of a self-driving TAAS system is very likely to happen at some point. He’s just not accounting for an enormous number of important factors when he suggests it will be a sudden and complete takeover.

  4. jimbills Says:

    Article yesterday in Jalopnik:

    This Is Why Toyota Isn’t Rushing to Sell You an Electric Vehicle
    https://jalopnik.com/toyota-focusing-on-hybrids-not-electric-vehicles-1850440908


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