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Big Oil just woke up to threat of rising electric car demand

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Bloomberg New Energy Finance

The world’s biggest oil producers are starting to take electric vehicles seriously as a long-term threat.

OPEC quintupled its forecast for sales of plug-in EVs, and oil producers from Exxon Mobil Corp. to BP Plc also revised up their outlooks in the past year, according to a study by Bloomberg New Energy Finance released on Friday.

The London-based researcher expects those cars to reduce oil demand 8 million barrels by 2040, more than the current combined production of Iran and Iraq.

Growing popularity of EVs increases the risk that oil demand will stagnate in the decades ahead, raising questions about the more than $700 billion a year that’s flowing into fossil-fuel industries.

While the oil producers’ outlook isn’t nearly as aggressive as BNEF’s, the numbers indicate an acceleration in the number of EVs likely to be in the global fleet.

(To see BNEF’s report comparing long-term EV adoption forecasts, click here).

“The number of EVs on the road will have major implications for automakers, oil companies, electric utilities and others,” Colin McKerracher, head of advanced-transport analysis at BNEF in London, wrote in a note to clients.

“There is significant disagreement on how fast adoption will be, and views are changing quickly.”

big oil - BNEF - graph.

BNEF expects electric cars to outsell gasoline and diesel models by 2040, reflecting a rapid decline in the cost of lithium-ion battery units that store power for the vehicles.

It expects 530 million plug-in cars on the road by 2040, a third of worldwide total number of cars.

For a story on BNEF’s electric car forecasts for 2040, click here.

The Organization of Petroleum Exporting Countries raised its 2040 EV fleet prediction to 266 million from the 46 million it anticipated a year ago.

Battery cars under the new projection account for 12 percent of the market within 23 years, compared to 2 percent in the 2015 forecast.

Based in Vienna, the group representing 14 nations expects half the number diesel vehicles as it did a year ago.

Others making similar expectations according to the BNEF note include:

The International Energy Agency more than doubled its central forecast for EVs, raising its 2030 EV fleet size estimate from to 58 million from 23 million.
Exxon Mobil boosted its 2040 estimate to about 100 million from 65 million.
BP anticipates 100 million EVs on the road by 2035, a 40 percent increase in its outlook compared with a year ago.
Statoil ASA, the Norwegian state oil company, says EVs will account for a 30 percent of new sales by 2030.

Just a fraction of the world’s cars sold today are powered by batteries instead of gasoline.

Many analysts increasingly say the market will expand rapidly as almost all major auto makers bring dozens of new EV models to market.

OPEC said in its oil market report on Wednesday that electric vehicle sale targets could dampen demand in some parts of Asia as soon as 2018.

Long-term growth depends on a wide range of factors, including policy decisions by governments seeking to tackle air pollution to the cost of the lithium-ion batteries that account for about a third of the cost of each one.

Yet even as oil majors lift their outlook, they remain much less optimistic than the automakers.

The world’s top automakers have a combined plan to sell 6 million EVs a year by 2025, rising to 8 million in 2030, according to Bloomberg New Energy Finance.

Some big companies plan to go all electric. Volvo AB expects to have an electric motor in every car by 2019.

It joins Elon Musk’s Tesla Inc. as a major EV maker and Geely Automobile Holdings Ltd., the Hong Kong-based maker of London’s black cabs, which is re-branding itself to focus on EVs.

“What oil companies and car companies are saying is diverging,” said McKerracher, the BNEF analyst. “This is a trillion dollar question, and somebody is going to be wrong.”

Source: Bloomberg New Energy Finance. Reproduced with permission.  

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  • Steve159

    I seem to recall an estimation (this site) that there’ll be no new ICE cars sold after 2025. The projections in this article seem too conservative. Who’s going to buy an ICE car once the initial cost is lower than ICEs, and with far lower cost of ownership.

    • Jacob

      Some people still buy luxury 300k range rovers today. Why anyone would do this is beyond my comprehension, but don’t underestimate the power of marketing and tribalism.

      • Steve159

        “Why anyone would do this”

        oh, that’s easily explained — high status males (the ones who drive Range Rovers, not Land Rovers) have (according to ample research) more sex, live longer, in better health.

        That right there is their motivation.

        • Jacob

          I can understand why people drive expensive cars – though in Perth white Range Rovers with tinted windows hardly earn a second glance. My point was that when you could get a cutting edge electric car with 7 seats and an autopilot for less money why would you spurn that for a Range Rover?

    • trackdaze

      Its pretty simple no projection by an opec or an iea is going to want to spook the horses. The financiers would have a fit.

      I recall a forecast by the US energy agency around about 2013 projecting solar power out to 2040. Within 3 years the 2040 figure had already been surpased!

    • Darren
      • jeffhre

        The 2018 model year starts in less than 60 days.

  • George Darroch

    They think it’s just cars. It’s trucks, buses, trains, manufacturing plant, generators. Everything.

    And it won’t be 2040. It will be 2030.

  • john

    This is going to be rather like the take up of solar panels where the predictions of price reduction were way off and the installations were way more.
    As the uptake of EV become more and more common the momentum will grow.

  • It always seems bizarre to me as to why all these forecasts never take into account the “S” curve factor. These technology changes go linearly (or a bit more sometimes) right up until the 15-20% penetration mark. Then they sky rocket to about 80%+ within a few years as mass-market adoption takes over and everyone “accepts” the new technology, clearly understands it’s pros/cons and buys it. There’s heaps of documented cases such as air conditioners, smart phones, the first cars and more.

    I can understand the oil and car companies wanting to continue the facade that EV cars “won’t catch on for decades” but the inflection point is more and more seeming to be around the 2020 mark. When all the car companies (including Tesla) are producing millions of properly good EV’s… it’s going to quickly become clear to the lay person that an EV is about the same price (or less?) than an ICE, is cheaper to run, cheaper to maintain, is a smoother, more powerful and quieter/nicer ride and more. No sane person will buy ICE and that market will tank quickly as this “new information” spreads like wild fire.

    About the only thing I can see that will limit the speed of technology switch over is how quickly car manufacturers can built good new EV’s (although people buying a new car could slow it down a bit too). Then again… if L5 fully autonomous cars kick off in 2020 I can see Transport as a Service becoming huge and costing less than owning your own car… so maybe most people will just ditch their cars entirely!

    • MaxG

      The S-curve or Bass diffusion model is a widely accepted, yet somehow widely ignored model when it comes to innovation and related ‘imitator’ uptake of new technology. The two graphs show exactly that; do one next year it will be far more exponential, and the year after, etc. Start-ups do not have the baggage of milking existing business models, add human nature’s resistance to change, and you see why incumbents (of any technology) are at a greater risk of becoming irrelevant.
      If you then take politics and government, who are further removed from reality, you understand the Abbotts of the world… 🙁

    • Mike Westerman

      Another significant driver is the loss of inner city petrol stations, as demand for their real estate and city rates outweigh their small margins. When charging stations start to proliferate instead, in city parking stations and shopping centres, uptake of EVs, firstly for commuting where range anxiety is not an issue, will accelerate as a virtuous circle. And that’s even before L5 is anywhere near happening.

      • Greg Hudson

        I was recently driving my wife’s ICE vehicle, and was running low on petrol… I had to visit 4 stations before I found one that had not been closed down. The real estate is simply worth too much these days for them to stay in business for much longer. If this continues, finding a ‘working’ petrol station is going to become more and more difficult. (I am talking about Doncaster area in NE Melbourne).
        Is anyone else experiencing the same problem elsewhere ?

    • Ken Dyer
  • trackdaze

    At current rates of growth, Internal combustion will be a niche market by 2030.

    • Brunel

      Hence there is no need to ban Lamborghinis – hardly anyone can afford one anyway.

  • solarguy

    Big oil need to invest in RE generation or there gone for all money. In 20 yrs time there will be a lot of stranded assets (the ICE) vehicles we will buy before the bust.

    • Brunel

      The Saudis seem to be smart – they want to fully privatise Aramco.

      They are also building a 1 km tall building! The air will be cooler and cleaner up there.

      • Miles Harding

        Watch out! That wood duck could be your pension fund.

        A few years back, New Scientist ran a story with the headline “Saudis to become a net oil importer by 2030”. This was based on a projection of their exponentially growing population and domesic oil consumption, which was estimated to exceed production about then.

        Of course, this is the ‘no income’ point and we can the kingdon of Saud to break well before then when their economy and systems are unable to cope.
        Privatising part of ARAMCO is exactly what I would expect as this point approaches. Keep an eye on this to figure out who is a complete idiot.

        Meanwhile the elite have bought a big chunk of the UK to escape the inevitable supernova.

        • Brunel

          New Scientist? I hate new scientist magazine! 15 years ago I read that there will be buses that get recharged at each bus stop – we still have diesel burning buses.

          And they also said that mobile phone theft will stop because there will be an international/national database of IMEI numbers – that did not happen either.

          • Roger Brown

            Tony Abbott said that we would get $550 back after he killed the (Carbon tax )

          • jeffhre

          • Miles Harding

            Yes, it does work, however there are a number of issues that were glossed over.

            The charge rate is 600kW, so will severely tax urban wiring if it comes form the general distribution circuits. Buffering batteries would be needed to reduce the peak power demand to something that can be readily provided along the route.

            This suggests to me that the buses will be wired like a trolley bus with the conductors under the street and only coming up at bus stands. I would expect to see large (400mm sq) cables with a substation every 2-3km. Timing and overlap of multiple bus charges could complicate the operation and force buses to wait at the stands.

            Batteries are usually a lot better at discharge than charge, so the very rapid charging will require a special type of battery. At present, the best candidate is Ni-MH, but these are heavy and may not be very durable because of the charge and discharge rates and number of cycles, say 15 per hour.

            This may explain why route buses seem to follow two design paths;
            a) A large battery (300-500kWh) that can run the bus for a full day’s operation.
            b) A smaller batttery (30-50kWh?) with charging at the terminus locations.

          • jeffhre

            The question was if they had them, not what are the engineering specifications of their power supply.

            Though you do have interesting ideas for cable sizes and battery type.

          • Miles Harding

            Hopefully not digging a deeper hole here…

            The cable sizes and substations were loosely based on what is used for DC rail and tramways, such as those in Sydney and Melbourne.

            The issues with the power supply may explain why all the buses we hear about have big batteries and charge at night.
            This doesn’t mean to say that fast charging at stops is hopeless, but that it probably doesn’t have a very wide customer base.

  • MG

    “What oil companies and car companies are saying is diverging,” said McKerracher

    Isn’t the whole point of this article to indicate that their views are CONverging?

    If “the world’s top automakers have a combined plan to sell 6 million EVs a year by 2025, rising to 8 million in 2030” isn’t this about the same as OPEC’s forecast of ~75m EVs on the road in 2030?

    • Ian

      EV are not hard or expensive to build and existing car factories can be retooled for EV as for any new vehicle model. It’s the tiny detail of the EV battery that stymies this whole transition thing. Since Tesla has shown us the way foreword, we can use Musk’s Gigafactory as a good unit of battery manufacturing. To replace all new ICE vehicles sold each year we need at least 200 gigafactories. How quickly will confidence build in the EV market for investment in this number of factories. If 1 factory costs $5 billion, the world needs to invest $1Trillion to complete the job. The Technological S curve others have mentioned here is actually an investor confidence curve.

      $1 trillion is not a lot of money: the world buys 100 million cars a year probably worth $2 trillion and uses 95 million bbl/day oil at $40/bbl is $1.4 trillion for crude oil.

      If one gigafactory takes 5 years to build and encourages 5 more to be built then the middle of the S curve would be 20 years. And the end of it 25 years.

  • john

    Is it not funny that every time a technology change happens the incumbents say it will never happen then they get the Kodak moment where the market has shifted and they are left alone.
    It is inevitable that Electric Powered Vehicles will become a compelling choice for consumers.
    It is even more funny that the original vehicle after the horse draw was an electric car.
    I guess one could say what comes around eventually comes around even if over 100 years later.

    • Brunel

      Cars (electric and petrol) might be ok for rural areas but cycleways and public transport should be promoted in the cities.

      • Ian

        A car is handy in association with public transport when its raining

        • Brunel

          A cycleway tunnel will keep you dry and is cheaper than a car tunnel.

          We really should look at developing a transport technology to use the existing land corridor under the high voltage electricity pylons. They tend to have nothing but grass under the high tension power lines because they do not want trees to grow and push up against the power lines.

          • Rod

            I really like the idea of cycleway tunnels. Just a bit of positive air pressure (in the direction of travel) could be done cheaply and would reduce effort considerably.
            Good luck getting funding though. People can’t appreciate the ROI for society for cycling infrastructure.

          • Brunel

            Batteries are so cheap now that you need not use human muscle for propulsion when riding a bicycle!

            I think batteries will halve in price again by 2020.

            Maybe we could even have fast gondolas. Perhaps above the railway lines and a stop every 5 km.

          • Rod

            But I want to use my muscle, sometimes.
            One of the main benefits of active transport is the regular cardiovascular exercise opportunity.
            However, in my old age I have taken advantage of a little electric assistance.
            This is on USD but $750 for a kit and battery sounds like a bargain to me
            https://lunacycle.com/bafang-bbs02-kit/

      • TheTransition

        Brunel, Do you have a family with children or parents that need looking after? Try getting your daughter to the netball tournament at 8:00am with public transport.

        • Brunel

          I never said ban. I am against government bans.

      • Greg Hudson

        Cycle/public don’t work in the suburbs when it is sub-zero/raining as it is here in Melbourne this week. I don’t have a car now (sold it whilst waiting for my Tesla Model 3) and I’m using an e-bike. That is… I’m using it WHEN I CAN. Most days I’m staying at home, because it is simply too cold to go riding.

    • jeffhre

      Kodak moment, Ha! Well put.

  • Miles Harding

    “The world’s biggest oil producers are starting to take electric vehicles seriously as a long-term threat.”

    This is the sort of self-centred thinking that has produced the mess ours and other governments call policy.

    Why are the oil majors wrong here?

    EVs are not a significant issue for them. They are being killed by the economics of finding and producing oil in a price constrained world. In recent years, it has become so expensive that they can’t afford to keep looking into increasingly inaccessible and difficult locations.

    A couple of years ago, Steven Kopits described this succinctly, as follows:
    They require more than $100/bbl for meet their capex and operating expenses, but the oil price is nowhere near this. The response has been to cancel and defer projects, divest of them, give up on production guidance and concentrate on cash flow to placate their investors.

    A recent interview on ‘Peak Prosperity’ indicated that discoveries in the last 3 years have been the lowest in the oil age, each equal to the previous worst, some time in the 1920s.

    Their problem isn’t production, but the ability of the market to pay. They are dead, but it’s not because EVs have injured them.

    • Ian

      Your points are well put but actually EV may save oil. Consider today’s world, you cannot travel, shop or eat without oil. It is ubiquitous, it is essential and modern life cannot exist without it. All of human endeavour is fuelled with oil. Raise the price of oil and the rest of the economy experiences inflation to match it. As things currently stand, petrol prices closely match the price of bread or milk. EV gives the economy a chance to uncouple from the price of oil. This means that a rise in the price of oil will not cause a corresponding rise in other prices. Petrol can now cost double or triple the price of other staples – milk & bread – Oil will now be free to rise in price to match exploration costs etc, it can become a ‘luxury’ item and provide more financial return for less product. Instead of peak prosperity vested in oil we can now have shifted prosperity and oil can become niche or repurposed. Of course, pity the suckers who have bought new ICE vehicles when oil is unshackled from its close bonds to the World’s economies and it starts to rise in price.

  • Mark Potochnik

    If the US screws up and fights renewables/EVs, it will only make China #1. China is going full force. Like with Germany, they will cry about trade imbalance. They are TOTALLY giving the market to China.

  • Robin_Harrison

    Throughout the industrial age disruptive technology takeovers have grown exponentially. The early doublings of that growth appeared slow and insignificant as the technology became established. By the time they become significant they are in the last few doublings of growth which are always extremely rapid. RE is already significant with EVs not far behind.
    Why are people, even BNEF, expecting this disruptive technology takeover to behave differently? It won’t.