Climate change and electric cars are continuing to throw the entire oil industry into question. While many were expecting society to move off of oil simply because we would ultimately run out of it, it seems that humans are gearing up to end their dependency on the dirty fuel before it’s even used up; more than ever, it’s understood globally that economically and ethically, oil is not sustainable.
According to the research firm Bernstein, two “existential threats to the oil industry” currently exist: climate change and “advances in battery technology and computing power, which have resulted in a surge in interest in electric vehicles and autonomous driving.” Bernstein has projected that the final peak in oil demand before its ultimate fall could come as soon as 2030-2035.
If a date so soon in the future seems far-fetched at first, it might be interesting to note that a similar study conducted by Bloomberg New Energy Finance found extremely similar results. Even the Financial Times has stated that “Fossil fuel producers face a future of slow and steady decline” in a piece titled “The Long Twilight of the Big Oil Companies.”
The Financial Times continued on analyze the implications of the “international objective of holding the increase in global temperatures to ‘well below’; 2C, agreed at the Paris climate talks.” This objective “implies the obsolescence of all fossil fuel production within the next few decades. The oil companies have not yet reconciled themselves to quite what this means.”
As to what exactly that meant, the Financial Times makes its own wager:
“Instead of railing against climate policies, or paying them lip-service while quietly defying them with investment decisions, the oil companies will serve their investors and society better if they accept the limits they face, and embrace a future of long-term decline.”
“While their share of the overall transport market is small, EVs [electric vehicles] and PHEVs [plug-in hybrid electric vehicles] will gain market share over time and eventually have a material impact on demand growth. While we do not foresee this being material in the next five years, EVs will start to have an impact toward the middle of the next decade.”
BNEF has postulated that “electric vehicles could displace oil demand of 2 million barrels a day as early as 2023. That would create a glut of oil equivalent to what triggered the 2014 oil crisis.”
These numbers assume that EV growth would remain at its breakneck pace of 60% per year. That said, even if EV growth slows to half of its current rate, it would still cause an oil crash by 2028.
Electric cars continue to possess a significantly lower per-mile fueling cost than that of gasoline-powered cars, even given today’s very low oil prices and even given that the electric cars be running on renewable energy.
The major change will occur when batteries, which currently make up around one-third of the cost of an electric vehicle, lower in price enough that EVs will actually be less expensive to by upfront than gasoline powered cars.