Electric Cars Pose “Serious Threat To The Oil Industry”
Fitch is a ratings agency that publishes highly influential financial ratings. Although we have been hearing for some time now that electric cars will eventually threaten the oil industry, Financial Times has cited Fitch’s recent report claiming that an oil industry “death spiral” is imminent, due to the rise of electric vehicles.
Many people continue to side with “Big Oil” and aren’t yet willing to admit that this is bound to happen, sooner than later. The Fitch report reads:
“An acceleration of the electrification of transport infrastructure would be resoundingly negative for the oil sector’s credit profile … In an extreme scenario where electric cars gained a 50 per cent market share over 10 years about a quarter of European gasoline demand could disappear.”
The report goes on to emphasize phrases such as “investor death spiral”, “serious threat”, and “resoundingly negative” impacts.
This is all in reference to the scenario that Fitch provides; a scenario in which investors pull monies from oil-related companies, making loans more expensive. It would result in a downward spiral, during which even having gas powered vehicles still on the road would make no difference.
Not only would big oil companies suffer, but also utility companies relying on fossil fuel. Furthermore, energy storage systems, much like the batteries in EVs, could take the worry out of the inconsistency of solar and wind power. Thus, driving oil down even further.
Keep in mind that the report poses such a situation as a worst-case scenario. However, the direction that it follows and the provided explanation, all make perfect sense. Not only does it make sense, but it obviously leads to sustainability, is environmentally conscious, and in the end, will be more financially sound. We have known all of this for a long time, but it is nice to see that a company with some leverage and impact is taking notice and disseminating the information.
Oil companies still believe that electric vehicles are too expensive, gas prices are staying low, and ICE cars are reaching breakthroughs in fuel efficiency. This may all be true. But all are temporary. EV prices are coming down and this will continue. Gas prices never stays low forever. While ICE vehicles are more efficient than they once were, they are not very efficient. Without electricity as a factor, there is only so much that automakers can do to make cars any more efficient.
Source: Financial Times