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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Can Oil And Electric Vehicles Coexist In Modern Markets?

Wall St

Although the novel coronavirus has wreaked havoc on many sectors of the global economy, leaving double the people unemployed in the United States as compared to February of last year, a rising long-term unemployed rate, and leading to more than 8 million U.S. residents slipping under the poverty line since the summer, the stock market continues to go gangbusters. In no sector is this more true than in the domain of electric vehicles, which have been hot--crazy hot. 

Tesla alone gained over 700% in 2020 and received an extra boost from being admitted to the S&P 500, making Elon Musk a centibillionaire and even allowing him to eclipse Jeff Bezos as the richest man on Earth for a short stint. Indeed, green energy and EV stocks have been seeing record-breaking investments as Environment, Sustainability, and Governance (ESG) investing goes mainstream, and 2021 is set to be another great year for renewables in the stock market. 

Much has been made of the admittedly heavily symbolic coincidence of Tesla, an electric vehicles company that has become emblematic of a more climate-friendly future, entering the S&P 500 just a couple of months after oil giant Exxon Mobil was dropped from the Dow Jones Industrial Average Index after nearly a century in the ranks of some of the most revered and stalwart blue chip companies in the world. It all pointed to a very tidy and sellable story line: fossil fuels out, clean and green energy in. onward and upward. But the reality, of course, is never so simple.

Related: Oil Rig Count Ends Twelve Week Streak Of Gains As Oil Prices Slip

“A roaring bull market can make even contradictory ideas true, as both electric-vehicle and fossil-fuel investors could tell you,” leading financial and investment news outlet Barron’s reported this week. “The former is trying to displace the latter, but for now, both sectors are happily coexisting in the market.” 

It’s true that oil stocks are not burning quite as bright as they once were, and that EV stocks are almost too hot to handle, but it’s way too soon to count fossil fuels out. This has been proven by the oil sector’s impressive bounceback from the brutal hit that the COVID-19 pandemic gave the sector. Less than a year ago, on April 20th, the West Texas Crude Intermediate benchmark plummeted to nearly 40 dollars below zero per barrel. They couldn’t give the stuff away. But now, as the global economy recovers and oil demand comes back, crude prices have risen to a 52-week high and European oil benchmark Brent Crude topped $60 for the first time since last year’s spectacular crash. 

“More electric vehicles will eventually mean lower demand for oil,” Barron’s admits, but that transition won’t happen overnight. Around the world, campaigns to replace gas-fueled cars with EVs are picking up speed, but a sweeping transition will require a lot of technological and infrastructure advances, and these things take time. The projected time that it will take, however, keeps contracting as more investors, world leaders, and industry leaders throw their weight behind the transition.

So while oil has recovered in the markets, it’s days are numbered. Many experts contend that peak oil is already happening as we speak, while it’s impressive that oil has managed to return to acceptable levels, it’s certainly not seeing the exciting kind of growth that the energy sector is. “The Energy Select Sector SPDR ETF is up about 1% in premarket trading and has added 12% year to date, far better than the S&P 500’s 3.5% rise,” Barron’s reports. 

“So EV or oil?” the article asks. “In a market overflowing with money, the answer is yes.” While that may be true today, it certainly won’t be true for too much longer. Whether it’s for environmental reasons or purely economic reasons or both, investors and markets are making one thing clear: fossil fuels are still relevant for now, but EV and renewables are the way of the future. 

By Haley Zaremba for Oilprice.com


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  • Mamdouh Salameh on February 21 2021 said:
    My dictum is that electric vehicles (EVs) will never ever prevail over internal combustion engines (ICEs) throughout the 21st century and probably far beyond. ICEs will continue to be the overwhelming means of transport well into the future.

    Still, ICEs and EVs could indeed exist peacefully in modern markets but it will the existence of a mouse next to an elephant.

    Moreover, nobody should be fooled by the rising paper valuation of Tesla or Bitcoin. Their valuations are based on hype and are therefore meaningless. Despite their valuations, they are huge bubbles waiting to burst. Just remember that the US housing market was valued in multi-trillion dollars in 2008 far bigger than both Tesla and Bitcoin and when the bubble burst, it almost brought the global economy and the global financial system down to its knees.

    And while market valuations have made Elon Musk Jeff Bezos and many others around the world centibillionaires at least on paper, they could put part of these unimaginable riches to a good cause by showing a humanitarian face of capitalism rather than the ugly face which Former President Trump has shown by using the money to provide anti-COVID vaccines to poor countries who can’t afford them before the bubble bursts. Failing to do that will return to haunt them and their countries in the form of new ferocious outbreaks of the pandemic.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Jim Pilavdzic on February 21 2021 said:
    The oil industry needs to make ICE much more energy efficient by regenerating heat from the Internal Combustion Engine. All of the heat from ICE today is lost to the environment. This is a significant issue. If we use Carbon Dioxide for cooling ICE and recover 25% out of currently blown in the wind 70% losses, we will be much better than EV for the foreseeable future. Technology for cooling ICE with CO2 is available and feasible. It is just that the greedy OIL industry does not want to do anything. They want to milk this cow as long as possible. Once, however, EV momentum takes over ICE will be CAPUT.

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