PLEA Network

28 March 2016, Energy Post, Wake up call for oil companies: electric vehicles will deflate oil demand. The major oil companies greatly underestimate the impact electric vehicles will have on their market, write independent energy advisors Salman Ghouri and Andreas de Vries. According to Ghouri and De Vries, the trends currently underway in the auto industry are likely to have a substantial impact on oil demand in the medium term, and even a devastating impact in the longer term. If there is one event in history that has shaped the crude oil industry, it is the popularization of the internal combustion engine (ICE) by the auto industry. At the beginning of the 20^th century, coal and wood were the dominant sources of energy, together providing more than 90% of global energy consumption. From 1910 onward, however, the Automotive Revolution triggered by Henry Ford spurred on demand for liquid fuels, causing crude oil’s contribution to global energy supply to more than double every decade. Consequently, by 1970 crude oil had taken top-spot in the global energy mix. Continued growth in the transportation sector ever since has provided the world’s oil companies with plenty of organic growth opportunities. And judging by the energy outlooks the major oil companies have published, they appear to expect this status quo to continue. For example, BP’s most recent Energy Outlook 2035 assumes that non-oil based transport will grow just 5% per annum for the next 20 years, and that essentially all of this growth will be in the gas-powered transport segment. Similarly, The Outlook for Energy: A View to 2040 published by ExxonMobil assumes that by 2040 “plug in” electric vehicles (EVs) and fuel cell vehicles (FCVs) will have no more than a 4% market share. Chevron, meanwhile, has indicated that it plans on the basis of the assumption that the auto industry will remain fundamentally the same for at least another 50 years. Alternative assumptions However, as we documented elsewhere, the auto industry itself expects its future to be radically different from its present. To assess how the new vision of the auto industry would impact crude oil demand, we have developed an Alternative Energy Outlook (AEO). Read More here