Could mainstream electric vehicle adoption result in a significant drop in crude oil demand? While some impact would of course be expected with large-scale adoption, could the impact be larger than is currently supposed?
An interesting new article published over on Seeking Alpha explores these questions, and provides in-depth descriptions of some interesting possible scenarios.
According to the analysts over there, roughly 39 million electric vehicles (EVs) and plug-in hybrids (PHEVs) will be on the roads in the US by 2030. A fleet of this size would lower gasoline consumption by around 17.2 billion gallons a year (the electrics would use about 180 terawatt-hours of electricity a year instead).
The analysts note that this would have a very bearish impact on gasoline demand, and therefore crude oil prices — and that most current market players “have difficulties understanding how sizable the impact electric cars could make on crude oil demand and price in the long term is.”
Owing to this prediction, the analysts note that investing in other commodities, rather than crude oil, might be a better choice over the long-term.
Here’s more, direct from that article:
In the United States 71% of the petroleum products consumed are used in transportation. Only 1% is used to produce electricity and 28% goes to the industrial, residential and commercial uses. Let’s discuss how big impact electric cars could make on the gasoline consumption.
How much would such a sizable electric fleet impact the gasoline and electricity demand? Electric fleet would save annually some 17.2 billion gallons of gasoline (~$39.5 billion at the pumps by current prices) by 2030. That corresponds to 0.4 billion barrels and it would be ~13% against the current level of gasoline consumption. Electric fleet would increase the electricity consumption by ~180 TWh. That is equivalent to ~3% of the current annual electricity consumption in the US.
…We believe that other asset classes and commodities might be better investments than oil in light of the fundamentals discussed in this article for the next 10-15 years. We recently wrote a bullish article on the agricultural commodities where the fundamentals look much better in our opinion.
There’s a lot more in the original article, some of it quite interesting (even if I don’t agree with everything). Probably worth a look for most… or at least anyone who has invested in oil companies.
Image Credit: Public Domain; Seeking Alpha
From eia.gov, 60% of oil for refineries come from imported sources. Even if we assume 1% (or 0.01%) comes from black market, that could be millions or billlions of dollars directly paid to ISIS. Climate change or not, directly paying a holes overseas is not a good idea.
Great point.
For a net drop in crude oil demand, EV market share has to start growing (in gross numbers) faster than the number of cars being added globally. We’re not there yet. And it’ll be at least 10 years till we get there. However, I can definitely see EVs gaining marketshare rapidly in the developed world. I’d be more optimistic than 39 million EVs and PHEVs in the US by 2030.