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James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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When Will Electric Cars Take Over The Roads?

EV

The age of the electric vehicle (EV) will be here sooner than you think.

Out of 1 billion cars in the world, only 2 million are electric. But that will soon change, as costs diminish, and more governments encourage the adoption of EVs to cut carbon emissions and fight urban pollution.

According to Bloomberg, by 2040, 54 percent of all new car sales will be for EVs. Millions of new EVs will take a big bite out of oil demand and displace 8 million barrels of transport fuel (gasoline and diesel) every day.

But the biggest factor in the EV surge is what’s under the hood…lithium ion batteries.

Bloomberg estimates that in the late 2020s, cheap battery technology will allow EV production to skyrocket.

The key is lithium, “white petroleum,” which is quickly becoming the world’s most sought-after mineral.

Jonathan More of lithium miner Power Metals Corp. calls it the largest commodity boom “in a generation.” The world is going to need “mountains of lithium, from all over the world, to satisfy the global hunger for batteries.”

A lot of those lithium batteries will be needed for EVs: in fact, major oil companies like Total SA have estimated that 20 million EVs will be on the road by 2030, and they’ll need enough batteries to power 200 million cell phones. That’s 1.2 million tons, six times current production levels.

With future demand like that, it’s no wonder that miners like Power Metals are so bullish. With a 15,000m drilling program about to get underway on 3000 hectares, Power Metals is at the center of the Canadian lithium belt that could contain as much as 7.5 million tons of lithium.

Forget oil and gas; the future of energy belongs to lithium.

Carpocalypse Now”

When EVs first started to roll off assembly lines, plenty of skeptics scoffed. EV sales were tiny and concentrated on the luxury car market.

But now that’s all changing. Related: Expect Much Tighter Oil Markets

In March 2018, more than 40,000 EVs were sold in Europe, a 41 percent increase from last year. Total sales for the year were up 37 percent from 2017. European auto-makers like Volvo want to concentrate on EVs, and plan on electric cars and trucks covering 50 percent of all sales by 2025.

Porsche will be 50 percent EV by 2023. General Motors and Toyota want to sell 1 million EVs per year by 2025.

The real juggernaut in the global EV market is China, where half of all EVs are currently in use. China will remain the chief EV market for the next 5-7 years, and demand is growing more quickly than expected.

Global EV sales are estimated to increase from 1.2 million in 2017 to 1.6 million in 2018 and 2 million in 2019. By 2025, some states have decreed that EVs must make up 15 percent of all new car sales.

The Boston Consulting Group released a report estimating that hybrids and EVS would cut the market share of internal combustion cars by 50 percent by 2030.

Whether you’re an EV skeptic or a Tesla super-fan, it’s impossible to deny that EVs are going to transform the international auto market…and trigger a massive increase in demand for lithium, the key ingredient in all EV batteries.

The White Gold

You can’t have EVs without lithium ion batteries. That’s why Tesla CEO Elon Musk built a “gigafactory” in the Nevada desert, where thousands of batteries are churned out every year.

The worldwide battery market was $5.1 billion in 2017, but it’s to expand rapidly and could reach $58.8 billion by 2024.

Batteries have gotten a lot cheaper to make, but it all hinges on securing an adequate supply of lithium.

New lithium deposits are being uncovered all the time. One asset, Paterson Lake in Ontario, contains thousands of tons of lithium spodumene locked away in “pegmatite,” hard-rock formations that are entirely different from the salt-brine lithium found in South America.

Power Metals Corp., which owns the Paterson Lake property, has launched an aggressive 15,000m drilling program. According to head geologist Dr. Julie Selway, the property contains a “staggering amount of pegmatite dykes” and a “huge potential of finding more lithium mineralization.”

Along with firms like Nemaska Lithium and Quantum Minerals Corp., Power Metals (PMC) is at the forefront of Canada’s lithium boom.

Together with new production in South America, Australia and Europe, Canada will help feed the world’s lithium demand and facilitate the surge in EVs by the 2020s.

When EV demand began picking up in 2015, it triggered a bull market for lithium. Prices shot up as battery manufacturers started buying up all the lithium they could find.

(Click to enlarge)

Lithium prices remained strong in early 2018, and capital is flooding into lithium projects all over the world.

A lot of the money is coming from China, the world’s leading battery manufacturer. Capital is seeking out lithium properties in South America, as Chinese companies hope to secure lithium supplies to feed EV battery growth.

A Chinese investment group recently acquired Lithium X for $265 million, taking over that company’s Argentinian property at the center of South America’s “lithium triangle.”

Chile and Argentina are the world’s no. 2 and no. 3 lithium producers, and production in Argentina is expected to triple by 2019 to more than 15,000 metric tons per year.

Related: Can Japan Dodge Trump’s Trade War?

So aggressive has the Chinese push into South American lithium been, the Chileans have started to push back, warning one Chinese firm away from attempting to buy one major lithium producer, worth $5 billion.

Money is flooding into the lithium sector. And lithium miners like Power Metals will need every penny to fuel surging battery demand.

Fueling the Fire

According to one August 2017 analysis, the global lithium ion battery market could reach $93 billion by 2025, growing at a rate of 17 percent each year.

To feed that colossal demand, the world is going to need lithium. A lot of it.

Miners in Canada and South America will bear the burden. Power Metals could potentially turn Canada into a major lithium producer, and it’s not alone: other companies like Nemaska Lithium have also made big discoveries, riding them to billion-dollar valuations.

Battery manufacturers feeding the EV market will rely upon new sources of lithium production. The surge of investment into lithium mining could turn into a flood.

Pretium Resources (NYSE:PVG): This impressive Canadian company is engaged in the acquisition, exploration and development of precious metal resource properties in the Americas.. Additionally, construction and engineering activities at its top location continue to advance, and commercial production is targeted for this year.

The company’s modest market cap and stock price make it an appealing buy for investors. Pretium has an impressive portfolio and if you can catch the stock while the price is right, there could be huge opportunity for upside.

Newmont Mining Corp (NYSE:NEM) Founded over 100 years ago, Newmont Mining Corporation is one of the leading mining companies in the world. The company holds assets in Peru, Australia, Ghana, Indonesia, Mexico, and around the United States. Primarily focusing on gold and copper, Newmont has steadily carved out a name for itself among those in the industry.

Newmont has had an excellent start to 2018, and it is set to keep up the pace as burnt bitcoin buyers move back to gold and silver.

Agnico Eagle Mines Ltd (NYSE:AEM) Canadian based miner, Agnico Eagle Mines is an especially noteworthy company for investors. Why? Between 1991-2010, the company paid out dividends every year. With operations in Quebec, Mexico, and Finland, the company also is taking place in exploration activities in Europe, Latin America, and the United States. This is certainly a company with tremendous potential that grows better by the day.

Investors have certainly taken note. In the past month, Agnico has seen its share prices climb steadily, and 2018 looks to be shaping up to be a promising year.

Turquoise Hill Resources (NYSE:TRQ) is a mid-cap Canadian mineral exploration and development company headquartered in Vancouver, British Columbia. Its focus is on the Pacific Rim where it is in the process of developing several large mines.

The company mines a diversified set of metals/minerals including Coal, Gold, Copper, Molybdenum, Silver, Rhenium, Uranium, Lead and Zinc. One of the fortes of Turquoise hill is its good relationship with mining giant Rio Tinto.

Going forward, Turquoise’s success at the giant Oyu Tolgoi project in Mongolia will be crucial to boost its lagging share price.

Cameco Corporation (NYSE:CCJ) Cameco is one of the largest global producers and sellers of uranium and nuclear fuel. Its operating uranium properties include the McArthur River/Key Lake, Cigar Lake, and Rabbit Lake properties located in Saskatchewan, Canada; the Inkai property situated in Kazakhstan; the Smith Ranch-Highland property located in Wyoming, the United States; and the Crow Butte property situated in Nebraska.

While many analysts see low uranium prices as a problem for miners, an OPEC like move from world uranium leader Kazakhstan to bump prices could benefit Cameco and its peers.

A strong push towards nuclear power from China, India and the Middle East could create further upside for this promising miner.

By. James Burgess

NOT AN INVESTMENT ADVISOR. Oilprice.com is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

RISK OF INVESTING. Investing is inherently risky. While a potential for rewards exists, by investing, you are putting yourself at risk. You must be aware of the risks and be willing to accept them in order to invest in any type of security. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell securities.

RISK OF BIAS. We often own shares in the companies we feature. For those reasons, please be aware that we are extremely bias in regards to the companies we write about and feature in our newsletter and on our website.

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  • Mamdouh G Salameh on May 04 2018 said:
    The age of electric vehicles (EVs) is already here but nobody should be misled to believe that they can take over the roads in the 21st century or far beyond.

    The biggest market challenge facing a wider EV’s use is the affordable environmentally-friendly and fuel-efficient internal combustion engines (ICEs) that are beating EVs hands down. This state of affairs is projected to last throughout the 21st century and far beyond.

    To get even a small share of the global vehicle market, EV manufacturers have to invest heavily in affordable EVs of all types, fast charging, and a much larger charging infrastructure and even bigger electricity-generation capacity globally.

    Currently, EVs and hybrid cars combined number under 2 million cars out of 1.477 billion ICEs on the roads worldwide in 2015 (and not 1 billion as the author of this article claimed), a negligible 0.14%.The total number of ICEs is projected to reach 2.0 bn by 2025 rising to 2.79 bn by 2040 according to US Research.

    Even a wider EVs penetration of the market projected by some experts to be 50 million EVs by 2024, 20 million EVs by French oil giant Total SA by 2030 and 320 EVs by 2040 by BP will only reduce the global demand of oil by 0.83 billion barrels (bb) or 3.3% by 2024, 0.32 bb or 1.33% by 2030 and 5.2 bb or 6.9% by 2040 respectively. This will neither be the peaking of oil demand nor a tipping point.

    A tipping point for oil could only be reached once 1 bn EVs (50% of the ICEs in 2025) on the roads. This is impossible to achieve within that time frame.

    Current worldwide production of EVs doesn’t exceed 500,000 cars annually. So it will take many decades to manufacture 50 million EVs by 2024 and far much longer for 320 million EVs.

    Moreover, there will be a need for trillions of dollars of investment to expand the global electricity generation capacity in order to accommodate the extra electricity needed to recharge 320 million electric cars.

    On the 8th of December 2016, the United States Association for Energy Economics (USAEE) published a research paper of mine titled:” A Post-Oil Era Is a Myth” (USAEE Working Paper No:16-290) in which I argued forcefully and convincingly that oil will continue to reign supreme throughout the 21st century and probably far beyond. This is despite the hype about the advent of EVs.

    My conclusion was that there will never be a post-oil era through the 21st century and probably far beyond.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Billyjack on May 04 2018 said:
    Electric vehicles will take over when the roads have charging while driving.
  • Kay Uwe Böhm on May 04 2018 said:
    Stupid report with only 10 cell phone batteries for a car assumption 1.2 miillion t.
    28 million t of lithium reserves not enough.


    Cars can drive also with LNG or CPG and that can be made out of water and air over exotherm reaction of electrolyse H2 with CO2 using new atomic power & turbines.
  • Joe on May 04 2018 said:
    Calling Lithium “white petroleum” just shows how poorly people understand the issue. Petroleum is a source of energy to propel the car. Lithium is just a glorified gas can. You still need electricity to provide the energy.
  • JohnJack on May 05 2018 said:
    Dr Mahmoud G Salameh, you shouldn't believe projections made by Big Oil who obviously have a stake in this. With the current CAGR (approximately 40%) electric vehicles will reach 100% of all sales by 2030. Knowing that the adoption of technology tends to accelerate, that share will probably be reached even before 2030. It is not limited to cars and trucks but will also be the case for boats.

    Electric vehicles will trigger a rise in electricity demand but not necessarily a need to increase electricity capacity.

    Autonomous technology will also create services that will be far cheaper for users than owning a car, and those services will use autonomous and electric vehicles. Those services will cause a crash in the car industry and a substantial reduction of oil demand by 2030.
  • Roger Spring on May 06 2018 said:
    I believe mamdough nailed it. I would like to add that weight, especially in rural areas has bridge weight limits, which limits a trucks weight. Electric vehicles have limited use, diesel is still king...
  • Fuggeda Bowdit on May 07 2018 said:
    At current driving rates, if 50% of all cars were EVs, and if EVs are 4.5x more fuel efficient than IC cars, we'd need about 100 small nuclear power plants to create the energy to fuel all those EVs to be driven the same distances as the IC cars they're replacing. We're talking 500 TWh (500 BILLION kiloWatt hours) per year in added electricity consumption, and there's nothing "renewable" that could even put a serious dent in that requirement.

    And besides the generating stations, we'd need to beef up our power grid to carry the 25% higher load to get that electricity to the consumer. Between reactors and grid, that's trillions and trillions of dollars and decades of construction BEFORE 50% EV use becomes remotely supportable.

    The most pie-in-the-sky fast charge battery I am aware of is one being developed by Porsche. They predict a 20-minute full charge. But that's still 4x as long as it takes to refuel an IC car. Granted, most people will do the most of their recharging at home, but we're still a nation that likes to take holidays in the family car. And the trip to Grandma's house two states over for Christmas supper becomes a nightmare if the commercial fueling stations can't handle peak holiday volume.

    So if it takes 4x as long to recharge an EV than to refuel the IC car (and that's with an yet unrealized charging technology), how many more refueling devices does the gas station have to have to support that peak volume? Anybody? That's right, four. Thank you, Bueller. You'd need four times as many charging stations as gas pumps to service the same number of vehicles in the same amount of time. And Level 3 charging stations cost 10-20x as much as a bog standard gasoline dispenser.

    Even if you only match the number of gasoline pumps 1-to-1 (because you think it's reasonable for EV owners to expect to wait an hour in line for the privilege of driving an EV), your 3-island, 12-pump service station would have to spend more than half a million dollars on charging stations alone (not including installation, remodeling, repaving and buying the extra real estate) to expand to service one-fourth as many EVs as you do IC customers.

    And to make matters even more enticing for the station owner, his EV customers will do the most of their refueling at home or work. So they might well go months without darkening the door of a commercial charging station. So even if we assume that fuel costs per mile driven for an EV are the same as for an IC car, the station owner's return on his astronomical investments for his electric refueling points is going to be minuscule in comparison to his ROI for his IC customers.

    So can you predict what impact that will have on the numbers of commercial fueling stations that remain in business?

    Fortunately, no EV battery has ever gone dead unexpectedly (except in Buffalo, and they deserve it), and EV motorists always plan meticulously so as never to get caught with a low charge when away from home. So they won't really mind when commercial charging stations become as scarce as pay phones.
  • Britches Taylor on May 10 2018 said:
    The natural gas industry is set to take off with all this demand for electricity . Don’t they have to frack to get natural gas ?

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