Oil companies may be facing uncertainty as the coronavirus pandemic triggers a collapse in demand for their products, but auto makers are betting the crisis will help accelerate an electric future, Reuters reported.
The sharpest plunge in oil prices in two decades has slashed the cost of filling up a tank of gas, eroding some of the incentive to make the switch to cleaner fuels.
Cuts in capital spending forced upon energy companies as their revenues crumble could tighten supply enough to cause a spike in oil prices, making electric vehicles more attractive just as automakers ramp up production, analysts say.
“We think this will lead to a tipping point, accelerating the switch to electric vehicles in many more countries around 2023-24,” Per Magnus Nysveen, senior partner at Rystad Energy, a consultancy in Oslo, told Reuters.
According to a Reuters analysis of 27 automakers compiled in partnership with Constellation Research & Technology, most companies apart from Elon Musk’s Tesla and China’s BYD are still in the early stages of transitioning to EVs, which make up a fraction of global sales.
With mid-sized to large petroleum-fuelled SUVs and trucks driving much of the recent growth in the auto sector, many companies are banking on these high-emitting gas-guzzlers to drive their near-term performance.
China’s BAIC Motor and German rivals Volkswagen Group and Daimler are pursuing some of the industry’s most ambitious decarbonisation targets.
“All the growth in transportation is being eaten by electricity,” said Harry Benham, chairman of Ember-Climate, a British energy transition think-tank. “Oil and gas companies have got no ability to defeat electricity as a transport fuel.”
With fuel for road transport accounting for about half of all oil demand, the possibility of a faster-than-expected switch to EVs in the wake of the pandemic is one of the main reasons some forecasts for a peak have been brought forward.
Global oil demand hit a record of just over 100 million barrels per day (bpd) in 2019. Rystad sees demand topping out at 106.5 million-107 million bpd in 2027-2028. The consultancy had previously forecast a marginally higher peak in 2030.
International Energy Agency projects that demand will plunge by a record 8.6 million bpd this year.
“It’s inconceivable that all that demand for oil comes back in one go, so the real question is how much of that is lost permanently,” said Mark Lewis, head of sustainability research at BNP Paribas Asset Management.
Reuters revealed last week that Tesla plans to introduce a new low-cost, long-life battery in its Model 3 sedan in China that it expects to bring the cost of EVs in line with gasoline models.
Volkswagen announced some of the most aggressive long-term plans to decarbonise its fleet, but the company still has to prove it can build EVs at scale, and has led the field in ramping up sales of mid- and large SUVs, the data shows.
Japan’s Toyota Motor’s proven capacity to build hybrids may bode well for its EV ambitions, the data suggests.
Japan’s Subaru, which produces a small number of hybrid vehicles, might have to rely on its partnership with Toyota if it wants to prosper as demand for EVs picks up, Constellation analysts said.
In April, Ben van Beurden, chief executive of oil major Royal Dutch Shell, said the company did not expect oil demand to recover in the medium term, saying the industry was living in a “crisis of uncertainty”.
Bernard Looney, chief executive of BP, was later quoted in the Financial Times as saying he would not “write off” the possibility the world had reached peak oil.