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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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Oil Markets Need To Plan For EV Dominance


There will be more than a billion electric vehicles on the road by 2050, according to Morgan Stanley, adding one more voice to notion that the EV revolution is coming.

The investment bank says that despite hiccups for many EV models to date, Tesla’s success thus far “shows that the consumer preference for internal combustion engines can be swayed.” Morgan Stanley analysts go on to add: “technology and usability are improving, and charging times are falling. There will come an inflection point where range and usability combine with the right price.”

In fact, the conversation seems to have completely changed only recently, with projections and policies getting a lot more bullish on EVs this year, a marked change from even just a year ago.

There have been a flurry of announcements from the auto industry, detailing an array of new EV models. Obviously, Tesla’s Model 3 garners most of the attention, along with its early rival, the Chevy Bolt.

But the latest is an announcement from Nissan about an overhaul of its all-electric Leaf. The new Leaf will have a stronger battery and much longer range at a lower price. The 150-mile range is less than its closest rivals – the Model 3 and the Bolt get over 200 miles on a charge – but the Leaf will retail for $31,000, undercutting the competition. It might not be appropriate for long road trips, but for everyday commuting, it would work just fine. Related: The Next Step In Mexico’s Oil & Gas Privatization Push

Many more EV models are coming down the pike. According to CleanTechnica, there are about 65 new EV models that will go on sale by 2022, taking total hybrid and fully electric vehicle models up to about 100. More models will offer more options to consumers at lower prices.

The excitement surrounding the long list of EV announcements is arguably only eclipsed by the ambitious policy pronouncements as of late. 

Scotland just announced that it would ban the sale of diesel and gasoline vehicles by 2032, eight years earlier than the rest of the UK. That comes a little more than a month after the British government outlined a 2040 plan to ban petrol-fueled vehicles. France has also put in place a complete phase out by 2040.

(Click to enlarge) 

EVs are still growing from a small base, but the growth rate is impressive. After passing the cumulative 1 million-vehicle mark in 2015, the global electric car stock hit 2 million a year later, according to the IEA’s Global EV Outlook 2017 released in June. China, the world’s largest auto market, is rolling out policies to scale up EV adoption. By 2025, China alone is targeting 35 million EV sales.

That level of ambition is perhaps only surpassed by India, which is aiming to have almost all vehicles sold to be powered by electricity after 2030. Whether or not the exact date is hit, or fully 100 percent of vehicles sold are electric, the scale of what India is trying to achieve is revolutionary. “These are the types of ambitious targets that drive transformations,’’ Clay Stranger, director of the Rocky Mountain Institute, told Bloomberg in a May 2017 interview.

The sales projections for EVs are all over the map, but according to Bloomberg New Energy Finance, one of the leading clean energy forecasters, EVs will capture more than half of the global auto market by 2040.

To be sure, projecting that far out is exceedingly difficult, and only offers a general sense of what to expect, rather than revealing hard numbers that investors should count on. But, these projections could also be wrong by understating the case, as has often occurred with clean energy. Costs tend to decline faster than expected, and adoption can ramp up at a non-linear rate. One of the major uncertainties is government policy, which is likely to only tilt the playing field more in direction of cleaner technologies versus incumbent techs that rely on fossil fuels. Related: In A Bold Move, Saudis Raise Crude Prices For Asia


But even if some of these forecasts prove too optimistic, it would only take a small dent in oil demand to really upend long-term price forecasts for crude. The oil market really booms and busts on the margins. For example, the U.S. “shale revolution” saw a ramp up of some 4.5 million barrels per day over the course of roughly 7 years. Those volumes, amounting to less than 5 percent of total global supply, are often credited with the historic meltdown in prices beginning in 2014. So, a change of just a couple of percentage points in the supply/demand balance can really cause havoc.

In that context, the threat of EVs causing such an upheaval is very real. BNEF says that some 8 mb/d of oil demand could be erased over the next 25 years because of EVs. And, of course, that demand destruction only rises over time. In other words, EVs may be a rounding error in the auto market right now, but they represent an existential threat to the oil industry, and a threat that is looking increasingly inevitable.

By Nick Cunningham of Oilprice.com

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  • Guy minton on September 06 2017 said:
    When they start putting plug ins at all the LaQuinta parking sports I will consider it real, and consider purchasing an EV. That is, if they can go 500 miles without recharge.
  • Jhm on September 06 2017 said:
    The situation is getting more serious, but this narrative has at least 2 blind spots: heavy duty EVs and scale of current demand erosion.

    Heavy EVs are three times the threat to oil demand than passenger EVs. Global stats on heavy EVs are not well reported. At least we know China added 116k electric buses in 2016. But how many more globally? I think 130k heavy EVs in 2016 is likely conservative. But one heavy EV offsets about 0.7 b/d of diesel demand. Thus, about 90kb/d of diesel demand in 2016.

    As for light EVs, there were 774k sold in 2016. About 25 light EVs displace demand for 1 b/d of gasoline. Thus, 31kb/d of gasoline displacement in 2016.

    So heavy and light EVs combined have provided about 120 kb/d of demand erosion in 2016. And this erosion can easy double every two years.

    But the critical thing for the industry to come to grips with is that current demand erosion is about 3 times greater for diesel than for gasoline. Diesel is on tract to peak in 2020 while gasoline will peak about later about 2025.

    It appears that the oil industry will be utterly blindsided by peak diesel even while they are still wringing hands about peak oil demand. But as the price of diesel falls, the price of crude will fall too. Peak diesel will crush diesel crack spreads and refiners will pull back on production. So crude takes a hit too. Diesel is the marginal product. It is the Achilles heel of the oil industry.
  • snoopyloopy on September 06 2017 said:
    "It might not be appropriate for long road trips, but for everyday commuting, it would work just fine."

    This is what everyone said about the Bolt too (due to the lack of a network of Tesla-like Superchargers), but many owners are finding out that the Bolt actually works great for road trips. I predict that the revamped Leaf will lead to many people making a similar discovery, especially since quite a number of them have already come to that conclusion even with the current Leaf.

    Also, Jhm's comment above is right on the money. The impending decimation of diesel demand by electric trucks and buses will catch everyone off guard in a major way.
  • Ecocharger on September 07 2017 said:
    There is another blind spot...the eventual brick wall of limited cobalt supply, which is essential to the projected e-cars...if the price of cobalt starts to skyrocket, the affordability of e-cars could be limited to the very well-off, not affordable for the average traveller.

    Also, technology improvement in gasoline engines could reduce emissions to the point where traditional internal combustion plants become eco-friendly, and the calculations need to start all over again.

    There are no certainties.
  • Timmie Tee on September 07 2017 said:
    The EV market will cap out about 10%... subsidies are propping up sales now... but already some models are seeing steep declines in sales (e.g. BMW i3)... here in Calif the state gov backed by EV lobbyists has doubled down on subsidies to try to move them off the lots.... while on the ICE side, Mazda is bringing a variable compression engine (HCCI) to market next year with +20% efficiency, and is a revolutionary step up in performance.... it's too bad the media and government policy makers are pushing the EV agenda without knowing the facts... it will cause gross inefficiencies in the transportation market-- there will tons of EVs in recycling centers in about 15 years being dismantled for scrap.
  • michael smith on September 07 2017 said:
    I will be dead by the time they are mainstream so I will not be buying one.
  • Tom on September 07 2017 said:
    China will be using coal for its clean energy EVs. Electricity.
  • citymoments on September 08 2017 said:
    People who believe Paris and London will replace fossil fuel cars with EVs after 2040 overlook a very simply fact : What is scientifically and technologically possible is not equivalent to what is economically possible. So far, the only economic system which creates real wealth is called capitalism, why capitalism ? Because only capitalism demands any enterprise of production must report expenditure and profit - you must produce more output than your input to justify as a productive entity. Scientifically and technologically, we could send people to the moon tomorrow but no enterprise will run moon flights for tourism. Every Tesla car sales was subsidized by CA state government with $7500, Tesla loss has almost ten folded over the last five years ( the loss in 2013 was $74m , the loss in 2016 was $667m ), this is not capitalism but in your face socialist robbery , socialism creates nothing but poverty. As precious commodity, the price of lithium and cobalt has been increased more than 200% for the last 2 years, it is against the basic maths to argue the cost of EV will be cheaper, just look the latest model of lap tops, are they cheaper than the price five years ago?
  • Rational Analyst on September 10 2017 said:
    Fossil fuels are finite. They are being depleted every day. They will never technically 'run out' but the remaining bits will be in widely scattered marginal fields (oil and NG) and seams (coal) and the amount recoverable per annum will be grossly inadequate to power what we expect as Business as usual for human civilization. Whether one regards EVs as socialism or anti-capitalist is irrelevant to the these facts.
  • citymoments on September 12 2017 said:
    Fossil fuels are finite.......Whether one regards EVs as socialism or anti-capitalist is irrelevant to the these facts'.

    Do you think EV consumes no natural resources? Lithium and cobalt are not only finite, they are precious metals. Socialism only creates misery and poverty!
  • Claire on October 01 2017 said:
    Lithium is one of the most abundant resources in the world (although not easily accessible) and makes up only about 2% of battery current battery tech, Cobalt is not a precious metal. with battery prices are rapidly falling, the cost of an electric car set to be on par with ICE in 5 years time, maybe earlier? with much cheaper running cost, and of course much better for the environment.

    Also you seem very keen to point out advances in engine tech, but fail to point out the huge advances in Battery tech, which is currently seeing massive investment.

    Some of the comments here are typical and highlight how ignorant people are about electric cars, they are set to change the automobile industry, and much quicker than people imagine.

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