I’m bullish on electric vehicles, for two big reasons:
- EVs offer a superior driving experience to gas-fueled cars
- EV costs are dropping rapidly, while the technology is greatly improving, with larger-capacity, more energy-dense batteries and faster charging times.
But oil industry leaders are apparently unafraid of this lurking threat. At a recent industry conference in Houston, Saudi Aramco CEO Amin Nasser told the crowd:
“I’m not losing any sleep over peak oil demand or stranded resources,” he said. “Oil and gas will continue to play a major role.”
Electric vehicles will not deliver rapid and economical reductions in carbon emissions until the electric fuel mix is sufficiently clean, Nasser said. He also sees coal remaining a big part of the energy mix for years to come, especially in places such as China and India.
“Right now, with electric vehicles, we are simply moving emissions from tailpipe to smokestack,” Nasser said.
Nasser is only partially correct. Around the world, and especially in the United States, we’re seeing significant improvements in deploying a cleaner electricity grid. With steep price decreases for solar PV and wind, this dynamic will continue to play out across the world, lowering emissions from EVs in the process. And in the meantime, driving an electric vehicle is only comparably dirty to a relatively high-mileage vehicle on a grid that is essentially entirely coal-powered, which will be much less common going forward.
But Nasser wasn’t done underestimating EVs:
As for vehicles, he said multiple technologies are in a race for the future, with options such as an advanced internal combustion engine, hybrids, plug-in vehicles, electric vehicles and hydrogen fuel-cell vehicles. Most vehicles on the road today have an internal combustion engine. There may be potential as well as challenges such as cost, durability and public acceptance, he said.
Technically, Nasser is correct that multiple low- and zero-emission vehicle options exist. But battery electrics are pulling away as the clear winner. Even companies like Toyota that have been pushing hydrogen fuel cell vehicles are now realizing that they need to catch up with battery electrics, at least on the passenger vehicle side. Costs, durability and public acceptance are all coming along, too, as automakers introduce new, more affordable long-range models.
Nasser wasn’t alone in his anti-EV sentiment at the conference:
Patrick Pouyanné, CEO of Total SA, told the CERAWeek gathering on Monday that he got an electric car to test. He called it silent and expensive, saying that renting a battery doesn’t save money compared with gasoline. He’s convinced big cities will see plenty of electric cars in 10 or 15 years because of air quality. But he still described a “longer story for oil in front of us,” noting uses such as airplanes and shipping.
It sounds like Pouyanné had an odd EV experience. For most EV drivers, it’s much cheaper than driving a gasoline-powered vehicle. And models like the Chevy Bolt and new Nissan LEAF have much longer range at affordable prices. Still, I agree with him that oil will still be needed in the medium-term for long-haul shipping and possibly aviation, if hydrogen and biofuels don’t catch up.
But there was one truly cautionary note for EV enthusiasts. Spencer Dale, a BP economist based at Rice University, modeled one “extreme” scenario where all new passenger vehicles had to be fully electric from 2040 onward (meaning a global ban on the internal combustion engine by that year). But even in that case, Dale calculated that global oil demand will still be higher 20 years from now than it is today, based on the increased number of vehicles on the road.
If anything, Dale’s modeling speaks to the need for more aggressive action on EVs around the world. From a climate perspective, we need to focus on transitioning our vehicles off of gasoline as soon as possible. While the oil industry may not see the urgency, those who care about the future of the planet sure do. But regardless of potential future policy actions, EVs are here to stay and grow, and it’s a threat that leaders in the oil industry appear to be underestimating.
The gas killer?
They should be. If some of the projections about declining battery costs are accurate, battery-powered cars will be much cheaper (and better) than gas-powered cars within possibly the next decade.
Electric vehicles like the Tesla Model S are already outselling similar gas-powered cars in their class, and a new generation of mass-market, long-range EVs have arrived with the Chevy Bolt, soon to be followed by the Tesla Model 3 and the new Nissan LEAF.
As E&E News (paywall) reported, one bullish study from the Grantham Institute for Imperial College London and the Carbon Tracker Initiative suggested that electric vehicles could make up around 35 percent of the market by 2035 and two-thirds by 2050:
“The oil and gas industry feels that EVs aren’t anywhere past being niche products,” said Luke Sussams, a senior researcher at Carbon Tracker and one of the authors of the report. “The model shows what might happen if EVs are further along that S curve [of consumer acceptance], just before that inflection point of mass uptick.”
The scenario outlined in the report, which also includes an aggressive projection for solar energy, would see oil and coal demand peak in 2020 and fall through 2050. The amount of oil displaced by EVs could reach around 2 million barrels per day by 2025 — the same volume that caused the 2014-15 oil price collapse.
I’m bullish on electric vehicles overtaking gas-powered ones for two reasons: first, electric vehicles are superior to gas-powered ones in terms of performance and convenience (less maintenance and easy home fueling if you have a garage); and second, battery prices have declined remarkably just since 2010. I remember the days of $1000 per kilowatt hour in battery prices that year; now Chevy reportedly bought batteries for the Bolt at $165 per kilowatt hour.
But the oil industry may not be taking this challenge that seriously. I know someone who works at Chevron, and he told me had presented some of his superiors with an analysis on the “threat of EVs.” But the company, in his words, is run by old-style Texas oil guys. Oil is all they know, and they’re not in a position to transition the company dramatically to a completely different product.
My guess is the oil industry will have another decade or so of a good ride, but they’re facing diminishing market share. Policies like California’s low carbon fuel standard and zero-emission vehicle mandate won’t help them either.
If I worked for an oil company, I’d be advising them to figure out how to make money off this new paradigm. It’s coming more quickly than they may realize.
