Elec­tric cars to rat­tle fos­sil fuel in­dus­try within a decade

New Straits Times - - Business -

ELEC­TRIC ve­hi­cles (EV) aren’t go­ing to de­stroy the fos­sil fuel in­dus­try any time soon, but they don’t need to in or­der to dis­rupt it. And that could hap­pen within a decade, when EVs be­gin to tip an­nual growth in petrol de­mand into struc­tural de­cline.

The scep­tics ar­gue that the bar­ri­ers to mass take-up of elec­tric ve­hi­cles are in­sur­mount­able and that re­cent en­thu­si­asm among pro­po­nents of the tech­nol­ogy — and some Euro­pean gov­ern­ments — is mis­placed.

High costs of own­er­ship, lim­ited range, lack of re­fu­elling in­fra­struc­ture are among many draw­backs that will limit their adop­tion, and thus the power of elec­tric­ity to re­place petrol.

So re­fin­ers like Valero En­ergy, Marathon Oil and Exxon Mo­bil can breathe easy.

Per­son­ally, an elec­tric car with a range of 241km to 322km would suit me per­fectly. Drive in al­most any di­rec­tion for 320km from my home and I would fall off the edge of the coun­try.

I also doubt that the United King­dom or French gov­ern­ments will ban the sale of cars with in­ter­nal com­bus­tion en­gines in 2040.

More likely they will fol­low the lead of man­u­fac­turer Volvo AB, which will of­fer only hy­brid or ful­l­elec­tric mo­tors on every new model launched from 2019.

And don’t for­get, there are at least four gen­eral elec­tions due in the UK be­fore that pol­icy is due to come into ef­fect, so there’s plenty of op­por­tu­nity for it to change.

The En­ergy In­for­ma­tion Ad­min­is­tra­tion (EIA) re­ports that every 159 litre bar­rel of oil re­fined in the US pro­duces 170 litres of prod­ucts, of which 132.4 litres are either petrol, diesel or jet fuel.

Al­most 70 per cent of the liq­uid fu­els con­sumed in the US last year were petrol or diesel/petrol, ac­cord­ing to data pub­lished in the BP Sta­tis­ti­cal Re­view of World En­ergy.

The fleet of elec­tric ve­hi­cles in use world­wide is on track to dis­place around 100,000 bar­rels a day of road trans­port fuel this year — most of it petrol — a ac­cord­ing to a re­port pub­lished last month by Bloomberg New En­ergy Fi­nance (BNEF).

They ex­pect that vol­ume to rise to 155,000 bar­rels a day next year.

To be sure, that is a tiny vol­ume com­pared with global petrol con­sump­tion that was re­ported by BP Plc at more than 25 mil­lion bar­rels a day last year, but that misses the point. It is at the mar­gin where the grow­ing fleet of elec­tric ve­hi­cles will make its pres­ence felt.

Take Tesla Inc’s Model 3 as an ex­am­ple. Once de­liv­ered, the cur­rent or­der book of 455,000 cars will dis­place some 18,000 bar­rels a day of petrol de­mand, based on ve­hi­cle miles trav­elled and fuel con­sump­tion data from the US Depart­ment of Trans­porta­tion.

That is not far off the EIA’s lat­est fore­cast of US petrol de­mand growth next year of 25,000 bar­rels a day.

That fore­cast may al­ready fac­tor in all those new Tes­las. If not, growth could be close to zero.

The tip­ping point is a lit­tle fur­ther away at a global level.

The In­ter­na­tional En­ergy Agency sees petrol de­mand in­creas­ing by around 240,000 bar­rels a day next year.

But by the end of the decade elec­tric ve­hi­cles could dis­place more than 290,000 bar­rels of petrol and diesel, ac­cord­ing to BNEF.

And by 2025, year-on-year in­creases in the vol­ume of fuel dis­placed could be enough to tip de­mand growth into con­trac­tion. What hap­pens then? Not the end of the world as we know it, for sure.

But petrol re­fin­ers should brace for prof­its to be steadily un­der­mined. Bloomberg

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