If Electric Cars Take Over, Here’s How Much Oil Companies Will Lose
When we hear about disruption in the auto industry, the narrative usually follows electric car makers (e.g., Tesla) making old-guard companies (e.g., Chrysler) obsolete. However, that’s only one side of the story.
The other side involves the energy providers, the conglomerates and royal families dictating the average American’s heating and gasoline costs. These numbers add up, especially if you drive a gas-guzzling vehicle.( Nearly everyone paid higher gas prices in 2017.)
However, by the time electric vehicles and hybrids become cheap in the early 2020s, oil companies will start scrambling to hang onto their business. Here’s how much corporations like Exxon and Shell stand to lose once EVs take over.
1. Battery prices falling fast
According to Bloomberg New Energy Finance, the same battery that cost $1,000 in 2010 will cost $73 in 2030. By that point, the total cost of a new electric car will be well below gas-powered vehicles. Currently, EVs cost less than half to operate but cost nearly twice as much to purchase. When the prices match in the early 2020s, plug-in vehicle adoption will rise sharplu. Ultra-cheap batteries in the following decade will likely bury fossil fuel vehicles.
Next: Oil companies are no longer so cocky.
2. Oil giants cracking
If you talk to folks at OPEC or Saudi Aramco, officials will tell you peak oil demand is decades away and the pumping will not cease in our lifetime. On the other hand, French oil giant Total SA projected EVs could account for 30% of the auto market by 2030. Meanwhile, Total backed up its belief by investing significant resources in battery companies and solar panel manufacturers. ExxonMobil may disagree, but when the ninth-largest oil producer invests in green energy, we have to take note.
Next: When rising oil costs actually hurt the industry
3. Higher oil prices have no future
Philip Verleger, a professor at Colorado School of Mines, described to Financial Times the “double-edged sword” higher oil prices will represent in the 2020s. If oil were to top $100 per barrel, it would appear to mean a return to big profits for producers. Unfortunately for them, electric cars would by then be a cheap alternative, meaning consumers could easily choose to pass on cars powered by gas. The only solution would be lower oil prices and thus lower profits.
Next: Why drive when you could have a chauffeur?
4. Passenger cars on path to extinction
By 2030, Stanford economist Tony Seba predicts 95% of U.S. passenger miles will be handled by on-demand, autonomous electric cars. We’ve heard how such a system would nearly eliminate emissions from personally owned cars, and it would wipe out about on fifth of gasoline consumption. Instead of driving a car, passengers would hop inside the robot taxi and head to the destination. This future might sound bland, but wait until you hear the price.
Next: Traveling without a car would be cheap.
5. Americans saving $5,600 per year
According to Seba’s projections, the average American would save $5,600 by operating without a car and depending on autonomous EVs for necessary travel. Much like the market for natural gas buried coal, so would the automobile as a service lead to the end of the car market. The remaining 5% would be the Mustangs, Camaros, and other driver’s cars that won’t go out of style. But if someone could save money and stop driving their Corolla, would that be a tough decision?
Next: A more aggressive oil peak
6. The rapid decline of the oil empire
If Seba’s projections were accurate, global demand would peak at 100 million barrels per day in 2020, or 10 years earlier than the most pessimistic vision of oil providers. That schedule would accelerate the decline of the industry considerably. Nonetheless, there would be hope for diesel trucks and airplane fuel consumption. In these projections, the battery-powered heavy-duty trucks would have not a foothold by then.
Next: Uber and Lyft driving the change
7. Uber and Lyft already started
Without the need for personal cars, Seba sees the number of passenger cars plummeting from 247 million in 2020 to 40 million in 2030. This shift is impossible without total domination by ride-hail companies such as Uber and Lyft. These companies already have electric cars on the road and should have the first autonomous models in service by 2021. The reason they are so keen on the technology is the lower operating cost and the ability to go without a driver.
Next: The equivalent of Saudi Arabian oil gone
8. When Saudi oil disappears
By 2040, electric cars would eliminate the need for 8.5 million barrels of oil per day, Bloomberg estimates. That figure is the equivalent of the output of Saudi Arabia. Naysayers say it will take much longer for this day to come, other factors will keep oil pumping, and the gas industry will never die. Many said the same about other industries. Once a better, cheaper alternative became available, they weren’t prepared for what happened next. In other words, Big Oil could lose everything.