As Big Oil Struggles, EVs Get a Boost

Tesla

FEB 19 2014 BY ERIC LOVEDAY 33

Tesla Coast to Coast Road Rally Proves EVs Can Do Everything ICE Can

Tesla Coast to Coast Road Rally Proves EVs Can Do Everything ICE Can

As Forbes reports:

“On the same week that Tesla shows off its cross-country “cannonball run,” (aiming to break the transcontinental record for driving an EV from the left to right shore of the U.S. in three days), bad earnings and production news comes from the oil patch.”

A win for EVs?  That seems to be the case Forbes is making:

“This could be really good news for Tesla and its competitors, among them, the Chevy Volt, the Nissan Leaf, and the forthcoming BMW i3. The more expensive oil gets, the more marginally attractive EVs become.”

The bad earnings and production news from the oil patch that Forbes is referring to is that Q4 earnings for Shell and Exxon Mobile confirm that oil is getting “more and more expensive to recover:”

“Both Shell and Exxon pointed to declining output, while at the same time bearing enormous investment burdens (Shell’s 2013 capital spending exceeded $44 billion).”

It goes without saying that as oil becomes more difficult to extract, prices will rise and output will fall.  This will no doubt lead to a greater focus on increasing vehicle efficiency and/or developing more plug ins.

Let Big Oil struggle.  The day will soon come when EVs thrive.

Our Sales Scorecard Shows the Continuous Rise of EVs:

CLICK TO ENLARGE – 2014 Monthly Sales Chart For The Major Plug-In Automakers *Estimated Tesla US Sales Numbers (Precise quarterly results updated during Tesla's Q1 report due mid-May) *Fiat 500e estimated based on available data.

CLICK TO ENLARGE – 2014 Monthly Sales Chart For The Major Plug-In Automakers *Estimated Tesla US Sales Numbers (Precise quarterly results updated during Tesla’s Q1 report due mid-May) *Fiat 500e estimated based on available data.

CLICK TO ENLARGE – 2013 Monthly Sales Chart For The Major Plug-In Automakers *Estimated Tesla Numbers have been included in this graph. Tesla Total Sales Verified Through Sept 2013 (as per Q3 financials) *Fiat 500e estimated based on available data.

CLICK TO ENLARGE – 2013 Monthly Sales Chart For The Major Plug-In Automakers *Estimated Tesla Numbers have been included in this graph. Tesla Total Sales Verified Through Sept 2013 (as per Q3 financials) *Fiat 500e estimated based on available data.

Source: Forbes

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33 Comments on "As Big Oil Struggles, EVs Get a Boost"

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Brian

Peak Oil? What Peak Oil? That was a myth, right? 😉

Mint

Total US oil production is actually going up, so peak oil deniers think this proof that the theory is a fraud.

The problem is that we just found out that China bought 20M new cars – a figure that will keep growing – and India, Africa, Indonesia, etc are growing too. They have a looong way to go before VMT per capita peaks.

brotherkenny

US oil production has gone up, but only because the price of oil is now high permanently. If oil goes below $80/bbl the frackers will lose money, and production will drop. The new production capability has thus pinned the price high permanently. Once we are more dependent on more alternative extraction techniques we will have higher prices even when availability is relatively high. We know these things since fracking has been around since the seventies. However, because traditional oil sources were plentiful, we didn’t need the alternative production techniques with their higher cost of production. Many companies know this has changed and thus have made long term capital investments in the higher cost production techniques. So, we can produce all we want or can use if we are willing to pay the higher prices. We would be swimming in oil if a BBL was $160 and gasoline prices were $6/gallon.

The investment by companies into higher cost production techniques tells us that many know the cheap oil is going away. Companies do not make these types of long term capital investments without careful consideration.

Spec9

Yeah, that is what all those stories you read/see in Forbes, on Fox News, the Economist, etc. will tell you.

But ironically, the increased production is actually an effect from peak oil. Conventional oil could no longer satisfy the demand so the price of oil shot up (from $20/barrel in 2000 to $100/barrel these days). With a higher oil price, previously uneconomic oil fields are now developed. And thus there is an apparent oil boom.

But one thing is very different about this oil boom compared to previous oil booms. Instead of sending the price of oil down like previous oil booms would . . . the price of oil remains high.

We are not at peak oil yet . . . but I’d say we are in the foothills. We have apparently passed peak conventional oil but there is a lot of unconventional oil out there.

Brian

“We are not at peak oil yet . . . but I’d say we are in the foothills. We have apparently passed peak conventional oil but there is a lot of unconventional oil out there.”

Nice metaphor. I’m stealing this 😉

MrEnergyCzar

Global conventional oil production peaked in 2006… unconventional sources won’t peak until humans can’t breath anymore…

MrEnergyCzar

Anderlan

KenZ

While I do actually doubt that they are…. for now… I would say that they will start to have more and more of an effect. Of course, when looking at the converse, there can be truth there: “Are super efficient gas vehicles a ceiling on EVs?” So, say we throw the standard hybrid ala Prius into the category of gas cars. If you’re a price conscious shopper, right now you go gas, maybe…. because in some cases EVs are very attractive or even better with their leases. But what if gas vehicles get more efficient and hit, say, 80mpg for a compact? The higher the mpg, the less price sensitive people are to gas prices and the harder it is for EVs to compete.

Of course, in the end, the environment wins this battle either way, just moreso with EVs than super efficient autos.

kdawg

Here’s a couple charts I made tracking gas price and vehicle sales over the last 3 years. You can see some intersting trends/reactions to gas price spikes,

Just_chris

It’d be really interesting to see gas price vs average car CO2/km or mpg?

That would give some insight into if people are buying new tech cars or just using the old tech cars less. My feeling is that the dropping oil consumption in the US and EU is driven by rich folk who can afford a new car shifting a little bit with the big shift being in those who can’t afford a new car shifting their behavior and using their old tech 2nd hand car a lot less.

kdawg

I’d also like a graph of daily miles travelled vs. gas price. I think consumption measurably goes down when gas prices go up.

It’s interesting to track the Volt fleet miles daily. I notice that the least amount of miles are traveled on Saturdays & Sundays, while the largest travel day is Monday.

Brian

This whole discussion assumes that people are making ration decisions based more or less on total cost of ownership. I don’t think we can apply those assumptions to car buying especially because the discussion of pros and cons of EVs versus ICEs goes far beyond TCO. People consider convenience (EVs), range (ICEs), performance (can go either way, depending on how you look at it), form factor, and much muchc more.

Rick

Everybody makes rational decisions. It’s just that people disagree as to what “rational” is, and different circumstances can all yield very rational, though very different, results. I think we all can agree that petroleum based ICE will lose eventually. The remaining questions are “when” and “to what”. It’s a process that will take a generation or more. With all the work being done on alternative energy, I’m still not convinced BEV is the end game unless manufacturers can get a handle on battery costs.

SeattleTeslaGuy

There is a multi-billion dollar advertising industry that says people don’t make rational decisions.

Brian

+1

Mint

I think EVs are affecting gas prices, but not through the classical market mechanisms substitution and supply/demand.

Due to the oil demand inelasticity, oil price is determined almost entirely by OPEC. It’s a cartel controlling almost half of world production, and they set quotas to meet their price targets. I’m pretty sure they could target $150/bbl if they wanted to, but at that price they would make alternatives a lot more viable, especially PHEV.

The EV threat is undoubtedly a strong factor in how OPEC sets its target price.

Spec9

OPEC is a paper tiger these days. Pretty much every OPEC country except Saudi Arabia is pumping at full tilt. Some could invest more to build up the ability to pump more but they are either not interested in doing so (some gulf states), they are too incompetent (Venezuela), or they are under sanctions (Iran). So OPEC actually has very little control. The could demand production cuts but they rarely do so and even when they do, the OPEC members cheat.

Ocean Railroader

OPEC does have control over the gas and oil supply I was reading in books and new papers that OPEC does need oil to stay above $100 a barrel to fund their massive government programs for the people living in their counties in that a lot of them don’t have anything else besides oil to sell. But if oil is above a $100 a barrel they will raise production to cash in too.

Ocean Railroader
I would have to agree that this is a good sized possibility and their are several reasons why it is. The first one is that be 1997 and 2002 during the EV-1 program gas prices didn’t really go up that aggressively. But as soon as the EV-1 program was trashed along with several other car makers EV programs gas prices between 2003-2008 when on a exponential rise from $1.50 to $4.30. During this run up till a few days before the economic crash of 2008 there where no EV’s on the road that you could go to a company and buy and drive off of the lot. Such as while the EV-1 was around gas was cheap and you could buy a EV. But when the EV’s where hunted down gas was high and you couldn’t by a EV. Then 2010 came around and you had the Nissan Leaf and Chevy Volt getting on to the highways. Gas prices also from that point on took on a steady decline to a point where they have leveled off at a steady price for now. What is also happening is that the EV’s are slowly gaining momentum to where a lot of… Read more »
MDEV

I think they are how funny the hurricane in the golf, the high temperature is Saudi Arabia, Irak protestors, Iran problems, Venezuela comments, winter, summer, naked girls on the street don’t have effects on Oil prices for almost a year…………..For sure the big Oil does not want pushes prices up now that EVs are a reality for costumers.

scott moore

The oil companies are not stupid. Any rise in EV share just means that much more demand for natural gas for the grid. They win ether way.

scottf200

They have so much money that the are investing in other forms of energy as well (ie. wind, electricity storage, etc).

Mint

A barrel of oil (~$100) will yield enough gas & diesel to drive about 1100 miles, assuming 40 MPG.

1100 miles in an EV will only need 350 kWh of electricity, and in a modern 60% efficient gas plant, that only needs 2000 cubic feet of natural gas (~$8 to the gas producers).

Losing 92% of revenue is not a win for the oil companies.

Alan

Could be a win for the electric power company …

Spec9

Yeah, I don’t know why power companies are not doing everything they can to get people into EVs. I suspect regulations stop them from doing that.

Scott Franco

Well, based on that idea they would be against increasing fuel efficiently as well. I don’t think it works so clearly. The oil companies want to either remain in the game, or alternately jump to the winning side.

By the way, thanks for the NG equivalence calculation.

veselin

By the way OMV is down in their profit by 30%. I don’t know if OMV do some business in USA, but here in EU they are big player.

http://www.marketwatch.com/story/omvs-libyan-production-outages-hurt-earnings-2014-02-19-34853332?reflink=zacks

Anon

Capitalism does not price resources based on their scarcity, but on how expensive they are to obtain. Because of this, Oil appears to still be deceptively affordable and plentiful for “business as usual”. Once the illusion completely collapses, you’d better own an EV if you want to still get around…

ffbj
The change-over to ev’s is, or rather will be, more of a ground swell, than a bolt from the blue. Forward thinkers often see things that will soon come to pass, but sometimes see the eventually inevitability of things to occur within a certain time frame, that when not met, is used by deniers of, whatever prediction of eventual inevitability, to claim that such and such is neither inevitable, and even go so far as to make claims that the eventuality may not even come to pass. For ev’s I think the tipping point will come, when the ground swell turns into a tsunami, is when first adopters continue to buy and vigorously recommend ev’s. The common thread is owners of ev’s bluntly saying: I will never buy a gas powered car again, or I will only buy ev’s from now on. When enough people start saying that 15% – 20% of new car purchasers, then the evolution to ev’s will be well on it’s way. 7 years or thereabouts to reach that point. Anyway in the mean time:higher prices for gas will reduce consumption of oil as will further adoption of alternative vehicles. Which will slow down our consumption… Read more »
Angelo

The one tool we have as individuals, to do something personally meaningful, to try and reverse global warming, is to stop being co dependents, by using petroleum products. To put it bluntly, don’t use the filthy stuff. That would be a real meaningful contribution. Maybe we a few more monster storms to wake people up.

Trevor Larkum

+1

Brian

Easier said than done. Many of us here are doing the best we can to stop using it for transportation. However, like many others, I cannot get completely off oil since I cannot afford a Tesla for the longer trips.

But it gets even harder when you consider all that oil is used for: transportation of goods (better not buy anything shipped by truck!), asphalt (better not drive on paved roads!), tar (hope you have a tin roof)… the list goes on. Basically, you cannot get 100% off of petroleum unless you move to an Amish community…

Tom A.

Yep…pharmaceuticals, plastics (everything seems to be made of plastic), etc.