Oil industry mulls its fate
Canadian energy industry gathers to consider impact of electric cars
CALGARY — Canada’s energy industry gathered at a petroleum museum Monday to consider how electric cars threaten oil, the country’s biggest export, especially if battery-powered cars make up 50 per cent of vehicles on the road by 2050 as projected.
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 currently account for 40 per cent of the worldwide demand for oil, meaning electric vehicles could represent a large market share threat to the oil and gas industry depending on how quickly consumers replace their conventional cars with hybrids or electric vehicles.
Tertzakian said there are currently more than 1 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 1 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 says his team organized the conference as there are too many oil 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, but analysts at the conference say the transition may be quicker.
Keynote speaker Steve Koonin, former under secretary at the U.S. Department of Energy and New York University professor, predicts that 50 per cent of the vehicles on the road in 2050 would be electric, meaning the threat to the conventional oil and gas business is large but not immediately imminent.
The adoption rate for electric vehicles is relatively slow, but is projected to ramp up over time and with regulations.
Koonin said that the pace of adoption of electric vehicles will depend on battery technology.
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 1 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, ARC Energy Research Institute 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.
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 Bruce Power vice-president, corporate affairs and environment James Scongack said during one panel.
“We think there’s a big group of people who, despite the price, want to buy electric vehicles,” Scongack said.
Another challenge was managing the electric grid, and output from power plants, if cars were fuelled electrically rather than with gasoline. Scognack said power producers were preparing for the transition and provinces, which regulate Canada’s electricity markets, need to prepare long-term plans as well.