There are many people who would argue that oil is on the edge of a precipice. The shift towards electric vehicles (EVs) is gaining pace, and without the massive demand for gasoline that comes from the use of internal combustion engines it is hard to see how demand for oil can be maintained. Add in the fact that solar, wind and other alternative power sources continue to get cheaper and more widely used and oil’s future can look bleak. Whether you believe that to be true or not is likely to be largely a function of your politics and your attitude to big oil. If you are somebody who believes that Exxon (XOM), Chevron (CVX), BP (BP) et al are bloated, polluting monsters you probably think it is inevitable and imminent. If you focus more on the millions of jobs that those companies bring to the economy, however, you are more likely to point to the fact that people have been predicting the death of oil for decades, yet demand continues to grow. Either way, investing in a company that stands to grow with the use of
EVs should be a no brainer.
I believe the time for panic is a long way off, but for energy investors, not hedging your bets with an investment that will pay off as that shift takes place would be stupid. Given the rate of growth in emerging markets it is quite possible that gasoline holds up even as battery power usage increases, but it still makes sense to look for a way to play a generalized rise in electric cars. One of the things that both EVs and alternative energy electricity generation have in common is that both are dependent on batteries. That makes something like the Panasonic ADR (PCRFY), the world’s largest lithium battery manufacturer, a must-own stock.
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The only thing that worries me about that statement is the chart above. It looks impressive, but the logical question to ask is how much is left in a stock that has gained close to fifty percent in the last year, especially when it is moving sideways after retracing from a high. PCRFY has done that before starting at the beginning of July but is still significantly higher than then, which suggests that it can do it again, but technical analysis is not the point here.
If EVs really do overtake the internal combustion engine, what we have seen over the last year will not even register as a blip on the long-term PCRFY chart. Similarly, those that point to rapid growth from Chinese rivals such as BYD or others like Samsung have a point, but it will not be a relevant one before too long. The global demand for oil is currently just below 100 million barrels a day, with a little more than half of that being used to make gasoline, and even a small part of the $2.5 billion a day that that translates to is enough of a market to go around.
What is the point, is that, like it or not, EVs, and therefore the batteries that power them, are entering into a period of incredible growth. Panasonic is the largest player in that market so buying their stock for the long haul and continuing to add to that holding on any dips would be a smart move.