Electric cars a growing threat to oil
Industry warned of losses as popularity of e-vehicles to rise, challenge market
CALGARY Canada’s energy industry, gathered for a conference at a petroleum museum here Monday, heard a sobering prediction: that electric cars will make up 50 per cent of vehicles on the road by 2050.
Steve Koonin, former under secretary at the U.S. Department of Energy and New York University professor, said the threat to the oil industry, while not imminent, is serious.
Koonin said the adoption rate for electric vehicles is relatively slow, but is projected to ramp up over time with regulations.
“It takes a long time to penetrate the fleet,” Koonin said, adding that the pace of adoption of electric vehicles will depend on battery technology.
Peter Tertzakian, executive director of ARC Energy Research Institute, which organized the event, said even a slow or modest adoption rate for electric vehicles over petroleum-burning vehicles could cause pain for oil producers because “when demand moves, the price of oil moves,” which could result in large losses for higher cost oil producers.
Cars and trucks account for 40 per cent of the worldwide demand for oil, meaning electric vehicles could represent a large market share threat to the oil sector depending on how quickly consumers replace conventional cars with hybrids or electric vehicles.
Tertzakian said there are more than one billion cars and trucks in the world — a quarter of those are on the roads in the U.S. — and electric vehicles make up less than one per cent of the mix. But the proportion is projected to grow.
On Saturday, Tesla Inc. said it shipped a record 25,000 cars in the first quarter, exceeding analyst expectations. Tertazakian said his team organized the event as there are too many such conferences that disregard how electric vehicles are challenging their market, while attendees at electric vehicle conferences “drink their own bathwater.”
Oil and gas companies have attempted to forecast the rise of electric vehicles in recent years to determine the threat to their market. ExxonMobil Corp, for example, issued one of the more conservative estimates that 10 per cent of cars on the road in 2040 will be electric.
Larry Burns, a former General Motors executive who has consulted for energy producer Hess Corp. and Alphabet Inc.’s self-driving car subsidiary Waymo, said the threat to the oil and gas industry is more near-term.
“If you’re not prepared for this inevitability, I think you’re in trouble,” he told conference attendees.
Burns said fuel efficiency regulations in the U.S. could hamper the demand for petroleum in North America by between 30 and 45 per cent by 2025.
He said car manufacturers across the board are working to boost efficiency by reducing the weight of their cars, building electric cars or hybrids and also by engineering more driverless cars, which are being designed to be lighter than conventional vehicles and therefore more fuel efficient.
“Just over one per cent of the gas being burned (in your car) is moving you, the rest is being used to move the machine,” Burns said.
At present, said ARC Energy director of research Jackie Forrest, one of the biggest impediments to electric vehicle adoption is price, as electric cars are twice or three times as expensive as gasoline-burning cars.
“They do have lower operating costs, but it’s hard to justify the initial capital cost,” Forrest said.
“We think there’s a big group of people who, despite the price, want to buy electric vehicles,” James Scongack, Bruce Power vicepresident, corporate affairs and environment, said on one panel.
Another impediment to electric vehicle adoption is car dealerships, which frequently do not keep an inventory of electric vehicles so it’s difficult for consumers to testdrive a battery-powered car before making the decision to switch, said Scongack.
Another challenge was managing the electric grid, and output from power plants, if cars were fuelled electrically rather than with gasoline. Scongack said power producers were preparing for the transition and provinces, which regulate Canada’s electricity markets, need to prepare long-term plans as well.