Tesla recharging | Photo: Windell Oskay, CC BY 2.0
With Tesla set to sell hundreds of thousands of cars over the next few years, Chevy Bolt sales expected to hit 30,000 just next year, Germany passing a nonbinding resolution to ban internal combustion engine vehicle sales by 2030, and Bloomberg reporting that the unsubsidized lifetime cost of electric cars is likely to fall below that of gas-powered ones by 2022, it’s really starting to look like the clock is ticking for oil companies, or at least for their profits.
It’s not that gas-powered cars will be replaced immediately, but it looks like we’re heading toward a massive contraction in the oil market in the early 2020s, and that’s on top of the already problematic market today.
See, to cause a massive contraction in the oil market, you don’t need to replace a whole lot of cars. You just need to replace enough to lower demand, and do it fast enough to worry investors. The video below suggests that’s only about the demand equivalent of about 2,000,000 barrels of oil per day. At 15 barrels of oil per year, that’s just shy of 50 million electric vehicles.
Sure, that sounds like a lot, but there are a billion cars on the road. Americans – just Americans! – bought 17.5 million cars just last year. The EU sales were 12.6 million last year. And if every car manufacturer makes a Bolt / Model 3 competitor? One that gets 200+ miles on a charge and costs under 30K? One that, by 2022, will cost less over its lifetime, without subsidies, than an equivalent gas-powered car? Suddenly that 50 million on the road doesn’t seem so crazy.
And now Fitch Ratings, which stands alongside Standard and Poor’s and Moody’s as one of the “big three” ratings agencies, has released a new report warning of the economic dangers of rapid electric vehicle adoption. The worry is that, if adoption is fast enough, it could a cause a market contraction — not a relative reduction in demand over previous years, but a contraction, where the globe simply wants less oil than it did the year before — making it a lot harder for oil companies to pay back their loans:
They recommend diversification into electricity generation and natural gas supplying for the oil companies that want to weather the potential storm on the horizon.
And with Tesla poised to buy SolarCity and start distributing whole home energy solutions, you have to wonder whether Elon Musk has already thought of all of this.
***
That’s all for today; thanks for reading! Except for the very *very* occasional tip (we take Venmo now!), I only get paid in my own (and your) enthusiasm, so please like This Week In Tomorrow on Facebook, follow me on Twitter @TWITomorrow, and tell your friends about the site!
If you like our posts and want to support our site, please share it with others, on Facebook, Twitter, Reddit — anywhere you think people might want to read what we’ve written. If there’s something you think we’ve missed or a story you’d like to see covered, drop us a line! Thanks so much for reading, and have a great week.
***
Richard Ford Burley is a human, writer, and doctoral candidate at Boston College, as well as an editor at Ledger, the first academic journal devoted to Bitcoin and other cryptocurrencies. In his spare time he writes about science, skepticism, feminism, and futurism here at This Week In Tomorrow.