Navigant Says Electric Cars Won’t Cause Next Oil Price Crash

1 year ago by Steven Loveday 53

Autonomous Nissan LEAF prototype

Autonomous Nissan LEAF prototype

Back in February, Bloomberg released an article entitled, “Here’s How Electric Cars Will Cause the Next Oil Crisis.” It predicted an oversupply of oil and an oil price crash, caused by the growth of the electric car market.  Would the same article be written today with crude approaching $50/barrel again?  It’s hard to say.

Uber Ride-Sharing App

Uber Ride-Sharing App

The Bloomberg analysis assumed that once EVs cause an oil displacement similar to the one in 2014 (2 millions barrels a day), a similar price drop will occur.

Navigant research points out that only as much as 2.1 million barrels were displaced, strictly due to EVs, from January 2011 to December 2014. However, much more displacement is occurring when looking at a bigger picture related to fuel efficiency, autonomous driving systems, and mobility growth like ride-sharing.

Fuel efficieny

In terms of the advancements of fuel efficiency, a larger and more attainable impact to displacing oil has been made. To equally displace the same 2.1 millions barrels of oil noted above, fuel efficiency only needs to increase .08% in 4 years. Due to the U.S. Corporate Average Fuel Economy (CAFE) regulations, this is and will continue to be far exceeded. Navigant points out:

Standards will increase average in-use gasoline powered light duty vehicle fuel efficiency 22% over the next 10 years. Eighty percent of global light duty vehicle markets are governed by increasing fuel efficiency regulations like CAFE standards; when considering the effects of these policies on a global scale, the oil displacement calculations belittle the oil displaced from EVs.

Autonomous driving

Although full autonomy may be a few more years away, partial autonomy is already in place and has been for some time. It is currently reaching more markets and growing even faster than EVs. There isn’t enough hard data at this point to prove that autonomous vehicles will displace oil, but the research and theories support it. With more systems in place, there should be less accidents, less congestion, and smarter, more efficient driving. Some cars are already utilizing traffic jam assist and efficient routing based on traffic, road conditions, weather, elevation, driving style and other factors.

Mobility growth

Vehicle ownership is on the decline. This is true mostly in part to alternatives like public transportation, ride-sharing, car-sharing, carpools, and even bikes. The displacement of oil is inevitable simply due to “fuel efficiency per passenger mile traveled”.

It is important to consider all of these factors as a whole, and not blame EVs alone for any oil crisis. Political leaders, policymakers, and advocates may feel compelled to make decisions or push agendas that negatively affect electric cars, especially in a time when oil prices are down. Reporting that there is even an actual crisis of any kind is likely to fuel the fire against EVs, when, in fact, we are far from any situation warranting the “crisis” label.

It’s surely not easy to forget about the recent stir involving the Koch brothers.

Source: Navigant

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53 responses to "Navigant Says Electric Cars Won’t Cause Next Oil Price Crash"

  1. Jon says:

    I think most true self driving cars will be EV simply because they can wirelessly charge them self. Also cheaper transportation means more travel so not much gas will be saved that way.

  2. Rob says:

    If we are truly hitting the ramp of the adoption s curve, all of thes numbers go away. From picture of New York City, we went from horse and buggy to all cars in 13 years. Even if it takes twice as long, you could easily see a 40-50% in 9-10 years which will absolutely cause an oil crash. Although to me the clock start ticking with the release of Model 3.

  3. Bloggin says:

    They may be making the oil price issue more complicated than it actually is.

    1. Oil companies got greedy and jacked up oil prices almost double to earn more profits. There was no shortage anywhere.

    2. Auto sales of big profitable SUVs tanked

    3. Auto companies began the ramp up of more plug-in vehicles

    4. Consumers immediately saw the benefit and and plug-in sales surged from 17k to 52k the next year to 97k the next, then over 122k.

    5. Oil companies freaked out and dropped the price back down, but consumers recognized that Zero fuel is better than less fuel.

    6. So even with oil prices at their lowest in many years, plug-in sales reached over 116k, with over a dozen new plug-in models on the way. All with the option of using Zero oil.

    Oil companies know the oil is on a steady decline, and they only hope for staying in the game is to push expensive hydrogen. While at the same time we are close to a 500 mile battery pack. More range than an ICE vehicle.

    1. sven says:

      Making hydrogen won’t use any of the oil companies’ crude oil. Natural gas will be used to make additional electricity to charge EVs, an to make the 67% of less of hydrogen that is not required by CARB regulation to be made from renewable sources.

      1. sven says:

        * 67% or less, not of less

      2. beta995 says:

        More likely solar will be used to power EV’s, in the suburbs.
        And you can buy a wind contract for your power as well.

        Anyone buying an EV at this stage is probably also going to get off a carbon source for electricity.

  4. przemo_li says:

    Ha ha.

    Nice try Navigant.

    So all that fuel economy improvement will happen without EVs in the mix?

    Truth is that since Tesla won* the luxury race, EVs are here to stay, and since car makers will invest in them anyway, those same EVs will be used to improve average fuel economy across fleets.

    *Since Tesla is best selling luxury car in USA and almost there in EU, others simply have to respond. Those who lost market share and profits will be most pressed to regain it (or get fired, but after those CEOs people who know EVs would follow).
    So either Tesla won the race or someone else will but still using EV.

    1. Bob Nickson says:

      I agree with you przemo_li. Wasn’t it the CEO of Volkswagen who recently said that EV and hybrid technology was the only way that CAFE standards could be met?

  5. Nix says:

    One of the two major US political parties have come out against Obama’s actions to increase the MPG requirements for the U.S. Corporate Average Fuel Economy (CAFE). If they get their way, they would back the automotive lobbyist groups who sued to try and stop the new CAFE regulations, and they would repeal Obama’s CAFE regulations.

    This isn’t fear mongering. This is the actual official, documented position of that party. The death of Obama’s CAFE mandates aren’t just theoretical, it is the stated plan.

    1. sven says:

      What’s Trump’s position on the matter? The Republican party has already started to kowtow to him.

      1. Foob says:

        IIRC, he has stated that he wants to abolish the EPA.

        1. ffbj says:

          ..and at various times the IRS, the Federal Reserve, Dodd Frank, Mexicans, Muslims, Women, (not cute ones), basically, anything a drunk red-neck is against on a Saturday night.

      2. Nix says:

        Sven — If you are a Trump supporter and a green car advocate, wouldn’t you educate yourself on that already?

        Trump wants to completely eliminate the Department who does all the CAFE regulations, and who gives us MPG ratings for cars, etc. Sadly, he doesn’t actually know the name of that Department:

        March 3rd debate — “During Thursday’s debate, Trump reiterated his claim that he would eliminate the Education Department and “the Department of Environment Protection,” his term for the EPA.”

        April 5th on Hannity — “[Trump] went on: “Department of Environmental, I mean, the DEP is killing us environmentally, it’s just killing our businesses.” Trump was likely referring to the Environmental Protection Agency”

        1. sven says:

          What makes you think that I am a Trump supporter when I don’t know where he stands on the issue of MPG requirements under CAFE? Isn’t it a more reasonable inference that I don’t support Trump and have tuned out Trump and his message, rather than to imply that I support Trump?

          Nix said:
          “Trump wants to completely eliminate the Department who does all the CAFE regulations, and who gives us MPG ratings for cars, etc. Sadly, he doesn’t actually know the name of that Department:”

          Apparently, you don’t know either. While the EPA does issue MPG ratings, it is the DOT through NHTSA that writes and administers the regulations for implementing the CAFE fuel economy standards, which are set by Congress and signed into law by the President..

          Congress passed a law in 1975 that created the first CAFE fuel economy standards, and then in 2007 Congress passed and President G.W. Bush signed the Energy Independence and Security Act of 2007 that set specific new CAFE fuel economy standards for 2007-2020, and requires MPG to be the “maximum feasible” fuel economy for 2021-2030 CAFE fuel economy standards. The DOT through NHTSA will determine what is the maximum feasible fuel economy for 2021-2030.

          1. Nix says:

            All of which is meaningless without EPA provided MPG numbers.

            It is like telling Columbus to sail west, without giving him a compass.

            And past laws are meaningless when another new law is passed that invalidates them. That is why they are called “lawmakers”. Sorry you don’t understand that.

  6. Speculawyer says:

    EVs will certainly not cause an oil CRASH. But between hybrids, plug-in hybrids, and pure EVs….there probably is a little bit of pressure on oil.

    At least psychologically to affect the markets. Like 400,000 Model 3 sales.

  7. jmac says:

    “Navigant research points out that only as much as 2.1 million barrels were displaced, strictly due to EVs, from January 2011 to December 2014.”

    Is that all ? That’s not much impact from electric cars. According to the EIA, the U.S. uses 19.4 million barrels EACH DAY !! So 2.1 million barrels spread out over 4 years is virtually nothing.

    No one ever blamed oil price fluctuations on electric cars before. In 2008 the price of oil went into orbit. No one blamed electric cars at the time because there weren’t any EVs on the road. Even today, the effect EVs have on oil prices is laughable.

    It’s an open secret that the Saudis recently increased production to maintain market share by putting North American frackers and marginal oil like the Alberta Tar Sands out of business. The increased production caused a temporary market surplus of oil driving prices down just like the Saudis wanted, making marginal operations unprofitable. Once again, we see the Saudis controlling and manipulating the price of oil world wide for their own purposes.

    We will NEVER be able to drill our way out of this. When U.S. horizontal drilling threatens the Saudis they just dump oil on the market and put U.S. operators out of business. The Saudis have tons of easy oil that’s inexpensive to produce while Canadian and U.S. oil are expensive and difficult to produce. All the more reason to get off oil now.

    Electric cars have had basically ZERO impact on oil prices and are not causing an oil shortage. In fact, we actually have an oil glut right now due to the Saudi intentional “overproduction”. There is no oil shortage. There is an oil oversupply, and that’s why prices are temporarily low.

    The fact that the Saudis can shut down North American oil operations at a whim ought to make it clear why we must absolutely get off oil. It should also make clear why “Drill, baby, drill” will not work.

    1. ffbj says:

      I would say you not entirely wrong about everything, and that is about the most I can give you.
      C-

    2. Paul says:

      @jmac – All good points, well stated. Howver, I do see a time when EVs, hybrids etc will begin to pull oil downward, maybe in 5 years? Where I drive, 10% are already hybrids & EVs (Priuii & Teslas).

      1. Paul says:

        & Leafs.

    3. Speculawyer says:

      It is small but not zero. And you also have to take into account the projected path of EVs. People now realize that EVs are real. CARB requirements, the Feds have a tax-credit, many other countries have incentives, and there are many EV models available now. They are not going to die like they did in the late 1990s. The technology is more mature and the need for them is more great.

      So when Tesla has 400,000 orders for the Model 3 . . . the writing is on the wall. That is the direction that things are moving in.

      1. Bob Nickson says:

        The Model 3 will accelerate EV adoption considerably. Accelerate is the right word choice, as very few people choose a car based on its supposed environmental impact virtue.

        People buy cars for status, and power sells better than economy.

        When Model 3’s are relentlessly dusting the combustion fleet at every opportune moment, the masses will see the light.

        The “No, I never have to go to a gas station, it’s fully charged every morning. No, no oil changes. Naw, no coal, my solar panels produce more power than I need.” part is all just icing on the cake.

        0-60 in 4 seconds for $35k. That will sell an awful lot of cars

        1. super390 says:

          $35000 is base model. 5.9 seconds 0-60. But there will be options.

    4. Nix says:

      jmac — I give you an A-

      Everything you said is true. The “-” is for the negative tone towards gas savings of EV’s. Yes, the impact has been small so far, but that is why there are so many programs around the world to help push past this early stage, and to go into mass production.

      Otherwise much of the substance I would have posted myself. Yes, global output being up is the biggest mover of oil prices.

  8. Just_Chris says:

    Why is an oil crash a bad thing? It’s what is required. Low oil prices have already done wonders stopping oil exploration in the attic and killing off unconventional oil. EV and PHEV should be seen as key enablers to transitioning the global economy to a more stable position. Hard baking inefficiency into an economy is short term craziness.

  9. scott franco (No M3 FAUX GRILL!) says:

    There won’t be another oil price crash. It happened the last time because oil was extremely overpriced by the cartel behavior of OPEC. Oil is in balance, arguably for the first time in at least 50 years. Fraccing (note proper spelling) has placed new reserves online that dwarf the existing reserves, and that is only in the USA. If the USA were to completely disappear, the fraccable reserves in the rest of the world would amount to hundreds of years of world supply.

    1. scott franco (No M3 FAUX GRILL!) says:

      PS. Since I know you all are curious, the spelling “frack” is an invention of the press that was coined to make “fraccing” sound like “f**king”, that is, a derogatory term. Frac is short for fracturing, and you will note has no “k” in it.

      1. ffbj says:

        What the Frack?

      2. wavelet says:

        No need for conspiracy theories on the name aspect. As you note, “fracking” is short for “fracturing”, the specific drilling technique used.

        It’s actually the rule in English to add a K to a term that ends in C when it occurs before a soft vowel (I,E) to retain the hard pronunciation of the C:
        picnic ==> picnicking
        frolic ==> frolicking
        traffic ==> trafficking
        panic ==> panicking

        See the Oxford English Dictionary on this…
        http://english.stackexchange.com/questions/107157/why-is-k-added-to-panic-when-suffixes-added-as-in-panicky

        1. wavelet says:

          …And I’m not even a native English speaker (-;

        2. Scott Franco says:

          Nicely done. Wrong, but nicely done.

      3. Nix says:

        fracc is actually a made up term from the oil industry lobbyist organizations to try and avoid the association with “f*cking”.

        Just like cigarette commercials by the tobacco industry used doctors in commercials to promote their cigarettes as propaganda too:

        Sorry you’ve bought into the Fracker’s propaganda. Do you smoke Camels too?

      4. super390 says:

        Then I will gladly stick to the incorrect spelling, because these fossil fuel pigs are f**king the planet and covering up their knowledge of the crime. The “K” also should be in there to honor the “K” in “earthquake”. Disposal-caused earthquakes resulting from the fracking boom are now officially a problem in Oklahoma, Kansas, West Virginia and Texas.

    2. Nix says:

      There will be oil price crashes and oil price spike for as long as oil is traded freely in the open market.

      All commodities and securities traded in open markets are subject to spikes and crashes. The is the very nature of a free market economy. There is no such thing as a free market that is immune from market bubbles and crashes.

      That would be a characteristic of a fixed-price market, not a free market. Like the price of certain drugs in Canada, etc.

      I thought you self-labeling righties understood the nature of free markets? You disappoint me.

      1. super390 says:

        “The Origin of Financial Crises” by George Cooper gives a simple explanation of why markets fail to balance when a good is bought based not on its current value, but on a belief about its future value. In negation of normal supply and demand, the more a speculative good rises in price, the greater its demand becomes. Until the belief collapses.

        1. Nix says:

          Super — Your source is correct. And the oil futures commodity market is specifically designed to always continually force investors to bet on the future, so there is no way to avoid the natural bubble cycle inherent to the system that your source describes.

          That is because Crude Oil Futures are traded for delivery for each of the next 30 consecutive months. That means speculators are pricing oil that will be delivered up to 30 months from today, based upon where they think supply/demand will be in the future — not what it is right now.

          There are even long-dated futures initially listed 36, 48, 60, 72, and 84 months prior to delivery. That means some commodity traders today are betting on the price of oil that won’t be delivered until 7 years from now.

          The system is structured to reward wildly speculative trading that has no basis in the actual supply/demand that will exist in the future when the oil is actually delivered, and this conundrum naturally produces bubbles. It is the very nature of the trading system, and it WILL produce bubbles that WILL eventually burst.

          There can be no end to bubbles due to the very structure of the futures market itself.

  10. philip d says:

    “Vehicle ownership is on the decline”

    I have to think globally this isn’t true when you take into account emerging economies with a good % the World’s population like India and China.

  11. scott franco (No M3 FAUX GRILL!) says:

    “Vehicle ownership is on the decline”

    Sorry, this is just idiotic. In fact, worldwide car ownership is on a steep rise, as formerly third world countries buy cars at virtually an exponential takeoff curve.

    Do your homework please.

    1. pjwood1 says:

      If we had the luxury of margins, I bet we’d find that where car companies make the most profit is where vehicle ownership is being tested. I don’t think it really matters as much what happens in India, or China, or that those countries are growing gangbusters.

    2. jmac says:

      In 1950 there were 10 million vehicles sold world wide. In 2015 88.6 million were sold. There are nearly one billion ICE vehicles on the road. It will take a huge swing towards EVs to truly effect world wide oil demand because oil demand is somewhat inelastic.

      The UPS truck uses oil.
      The refrigerated Semi uses oil.
      Driving to work uses oil.

      Sadly, right now, our whole economy depends on oil and without it everything comes to a screeching halt. Consider how many ICE vehicles are already on the roads world wide and how many are still being built every year.

      It will be a long, long time before it can actually be said that EVs are destroying demand for oil.

      1. Rich says:

        Agreed that the current manufacturing scale of ICE vehicles is enormous. At current battery capacity (no technological leap), we would have to see somewhere around 200 battery Gigafactories built in order to supply batteries for all new cars sold. LG Chem might have or soon to have the capacity for 1 Gigafactory (across multiple manufacturing sites) and Tesla will have one built and at full capacity by 2020. Until battery prices drop enough to allow EVs to compete at the ~$20K price range (with no incentives), I doubt we’ll see significant growth in battery manufacturing infrastructure. Some have speculated that price point could occur as early as 2021. Time will tell. Given a start date of 2021 and a 5 year build out and ramp up per Gigafactory, it’s likely to be 2040 before we see massive scale in EV manufacturing.
        The timing could significantly reduce if a major technological breakthrough is made in battery capacity (say 10x). I’m sure a technological breakthrough will happen, but doubt it will happen in the short term (5 to 10 years). The other major factor in play is Apple and its massive bank account. Again, time will tell how large of an impact Apple can make.

    3. TomArt says:

      In the developed world, it is…

  12. Woochifer says:

    I have no idea what timeline this analyst has in mind, but vehicle ownership is up sharply when you look at the global market. That figure is only down in the U.S. And even so, multi-car households remain the norm.

    The whole claptrap about autonomous vehicles being only a “few years” away is pure nonsense. Self-driving cars still can’t figure out how to navigate construction zones, stormy weather, and poorly marked lanes.

    Just because nav systems can direct you around traffic jams doesn’t mean that we’re that much closer to self-driving fleets replacing private cars.

    1. Woochifer says:

      As far as the Bloomberg article is concerned, the scenario that it painted out is far more plausible, because it does not take a huge disruption in demand to crater the global oil prices. Fuel efficiency mandates are already set to cancel out the growth in oil demand from increased automobile ownership in developing markets like China and India.

      EV adoption will create a much bigger net drop in demand for oil over the next decade. And that’s a much more realistic timeframe the shifts over to autonomous driving and mobility modes that the article claims are afoot.

      1. jmac says:

        In 2015 88.6 million vehicles were sold. There are nearly one billion oil guzzling vehicles on the road already. In 2016 another 90 million ICE will be produced.

        A handful of electric cars is not going to affect overall oil demand significantly.

        The latest drop in oil prices is NOT due to demand for oil going down. It is because the Saudis and OPEC artificially increased PRODUCTION and flooded the global market with cheap oil.

        1. Nix says:

          jmac is correct. World oil consumption has been going up every year since 2010, after dipping in 2008 and 2009:

          2000 76,959.10 1.31 %
          2001 77,756.45 1.04 %
          2002 78,526.76 0.99 %
          2003 80,173.85 2.10 %
          2004 83,176.98 3.75 %
          2005 84,668.04 1.79 %
          2006 85,586.39 1.08 %
          2007 86,700.09 1.30 %
          2008 86,027.86 -0.78 %
          2009 84,953.36 -1.25 %
          2010 87,839.10 3.40 %
          2011 88,657.70 0.93 %
          2012 89,668.91 1.14 %
          2013 90,354.27 0.76 %

          Recent price drops are due to over-production, not a reduction in consumption. We are on the right path with green cars and green energy, but we’ve just barely started down that path.

        2. Terawatt says:

          Blame the Saudis why don’t you!

          Saudi production is high as ever, but it was in fact the US production that surged and led to overcapacity. Fracking caused production to increase dramatically.

          In addition, the US lifted is export restrictions on Iran, which quickly ramped up to old output levels.

          OPEC didn’t cut production, supposedly because they would defend market share and drive fracking out of business rather than reduce their share but get a better price. There are reasons to doubt the official explanations though. Multiple OPEC members, but most notably Russia, are hard pressed for cash these days, and simply cannot reduce their output unless they are certain the price will increase enough to fully compensate for reduced volume. With deep mistrust within OPEC – worst of all between Saudis and Iran – it was never going to happen.

  13. ffbj says:

    They might not cause it, but they will have an effect.

  14. Terawatt says:

    Not blame EVs alone?!? More like not CREDIT only EVs for causing an oil crisis. It’s a good thing, like a medicine that is a life saver but has a slightly bitter taste.

  15. Brave Lil Toaster says:

    Oil crisis?

    When *I* was growing up, that meant OPEC had cut off America again.

    Completely opposite what a crisis of oversupply means to the oil industry. The oil industry can bite my shiny metal ass.

    1. Nix says:

      +1

      plus another bonus point for nifty pop-culture reference… =)

  16. mr. M says:

    Lets calculate:
    average Driver = 20.000km/a (EU 15.000km, US 24.000km = 15.000 miles)
    average consumption of car = 6.5l/100km (36mpg)

    average consumption (per car, per day) = 3.56l

    1 barrel oil = 159 Liter

    Result:
    ~45 cars consume 1 Barrel a day.
    ~90 Million cars consume 2 million barrel oil a day.

    If EVs double each year we will reach 90 Million EVs sometime in 2021. That will be the earliest date where EVs can cause a oil crisis according to the article.

    Timeline:
    2015 – 1 million EVs sold (cumulated ~2 m cars)
    2016 – 2 m EVs sold (cumulated 4 m cars)
    2017 – 4 m EVs sold (8m cars total)
    2018 – 8 m EVs sold
    2019 – 16 m EVs sold
    2020 – 32 m EVs sold
    2021 – 64 m EVs sold (128 Million EVs total)

    Cross checking:
    C02 rules will lead to 20-25% of EVs in the EU by 2022-2023. The EU is around 12 Million cars sold, so the EU will account for around 3 Million Evs by 2022.
    Worldwide there where around 70 Million cars sold. I don’t expect EVs to reach more than 25% marketshare by 2022. This means more than 17.5 Million EVs seems unrealistic.

    Therefore the cumulative 90 Million EVs sold will likely take another 2-3 years. The year 2024 seems more realistic for EVs to cause a oil crisis.

  17. Alan says:

    It’s good some countries are pushing EVs.

    I’m in Australia, where there’s little interest in EVs or Plug-in hybrids – hybrids do have a small following, but partly because of supply problems (we’re still waiting for 2016 Prius to arrive at most dealers).

    There is no Government support or subsidies, and, unless we have rooftop solar, we pay 5 times as much (net) for power than in USA – meaning that a good hybrid will be cheaper for running costs than an EV.