While environmentally-conscious consumers are celebrating the significant growth and success of the electric cars market over the past few years, those involved with oil companies are likely singing a different tune.
In a new report, Bloomberg New Energy Finance (BNEF) predicts that price parity between electric vehicles and conventional vehicles will allow electric vehicles to make up a third of the world’s fleet by 2040—that’s about 530 million cars. This would reduce oil demand by as much as eight million barrels a day, about 8% of the expected global total. BNEW expects to see this parity over the next eight years. Oil companies around the world are beginning to treat electric vehicles as a serious threat to their profits as awareness of this potential outcome grows.
Many electric vehicles available on the market—including those from Tesla—have proven themselves to be considerably more durable than many conventional cars, meaning that many electric vehicles built today could still be fully operational and on the road come 2040. This could very well increase the rate at which electric vehicles overtake conventional vehicles in popularity and prevalence.
How will reduced demand affect oil companies?
In a note to clients, Colin McKerracher, head of advanced-transport analysis at BNEF in London, wrote, “The number of EVs on the road will have major implications for automakers, oil companies, electric utilities, and others.” He added, “There is significant disagreement on how fast adoption will be, and views are changing quickly.”
For even the biggest oil companies, reduced demand could pose a major challenge. The growing popularity and availability of electric cars is pushing uncertainty into the futures of oil companies around the globe. While a future without oil companies and oil itself is probably not as close as some may hope, reduced reliance on oil for automobiles will eat into profits, as well as oil industry jobs. The influence and revenue of Big Oil could ultimately suffer as a result of electric vehicle adoption, as oversupply will likely lead to a reduction in oil prices.
Other organizations project figures similar to the BNEF’s estimates, if somewhat more conservative. The OPEC expects there to be 270 million electric vehicles on the road worldwide in 2040; BP and ExxonMobil expect roughly 100 million.
BP also predicts that if Big Oil should gradually divorce the automobile industry, it might begin to find increasing success in and demand from other industries. Said Spencer Dale, BP’s group chief economist, ““The possibility that the most important source of growth in oil demand in the 2030s won’t be to power cars or trucks or planes, but rather used as an input into other products, such as plastics and fabrics, is quite a change from the past.”
Dale continued, “The impact of electric cars…is one of the key uncertainties surrounding the long-term outlook for oil.” The extent of their influence on oil companies will be determined in the very near future.
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