What Does This Oil Analyst Have To Say About Tesla, Elon Musk, & EVs?

JAN 9 2019 BY EVANNEX 59

OIL ANALYST CONSIDERS THE INDUSTRY IMPACT OF ELECTRIC VEHICLES, TESLA AND THE ‘ELON MUSK EFFECT’

When will rising EV sales begin to cut into global demand for oil? It sure ain’t happening yet – as we discussed in an earlier article, over the past few years, the increasing popularity of trucks and SUVs has canceled out the gas savings from EVs a thousand times over.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Charles Morris. The opinions expressed in these articles are not necessarily our own at InsideEVs.

Above: A Tesla parked in front of oil wells (Image: Tesla Owner)

However, those who earn their daily bread from hydrocarbons are far from dismissive of the long-term threat. The electric wolf may not be anywhere near the door of the house that oil built, but it can be clearly seen hungrily prowling on the horizon. These days, oil industry observers are paying close attention to the progress of Tesla and other EV-builders.

One analyst who’s keeping a wary eye on the new technology is Stephen Schork, who has spent more than 25 years in the world of commodity and derivatives trading and written extensively on related subjects. Mr. Schork knows whereof he speaks, and he’s been predicting that alternatives to oil would curb demand in the long term since at least 2016.

Above: Oil analyst Stephen Schork discusses the oil industry and subsequent news surrounding Tesla (Source: Fox Business)

In a recent interview with Fox Business, Schork sounded, if not an alarm, at least a note of caution. Towards the end of a highly technical discussion about the outlook for oil prices, he said, “My overarching concern right now is the economic development. Tesla put 150,000 new Model 3s [on the market]. That’s 150,000 cars that don’t consume gasoline. And it’s not just Tesla – Porsche, Audi, BMW are all coming out with all-electric vehicles in 2019. So the inelasticities of demand in this market are fundamentally changing.” The moderator added that people tend to dismiss EVs until they drive one. “The torque is incredible…and it’s really a great driving experience,” she said, as Schork nodded in agreement.

Mr. Schork is far from the only petro-pundit to be concerned about the electric future. Several industry execs have recently conceded that the day of peak oil demand could be upon us sooner than previously predicted, and Shell, BP and Total are hedging their bets by investing in EV charging companies. Other players are taking a more combative approach, investing in the political process to try to stop, or at least slow, the Tesla-led transport revolution.

Above: Back in 2016, Oil analyst Stephen Schork was already talking about the ‘Elon Musk effect’ on the oil industry (Source: Fox Business)

The dynamics of the growing EV market vis a vis oil demand are complicated, to say the least. Contrary to popular belief, there’s no clear correlation between oil prices and EV sales, which have grown every month for the past two years, even as gas prices have been at historic lows. However, there’s no doubt that cheap gas has whetted consumers’ voracious appetite for trucks and SUVs, which so far remain a mostly unelectrified segment (except, of course, Tesla’s Model X and Jaguar’s I-PACE). If global demand for oil does begin to drop, gas prices are bound to fall further – that’s how markets work. Shifting demographics also affect the equation, and political developments are a huge wild card, so, while the arc of technological change is bending slowly towards electrification, it’s anybody’s guess what the timeline is going to be.

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Written by: Charles Morris

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers, free of charge. Our thanks go out to EVANNEX. Check out the site here.

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59 Comments on "What Does This Oil Analyst Have To Say About Tesla, Elon Musk, & EVs?"

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The I-Pace is basically a car — not a SUV…..

It’s a CUV. And Model X is a minivan.

I wish. I can’t get my GF into minivans, but she loves the Model X. If they just called it a minivan, I could probably get her a caravan and be done with it, but she wants the similar Journey, but it’s smaller, less capable, and has less features, for a higher price, all because she can call it an SUV like the Model X.

I thought the Model X was a raptor.

Look up the definition before misusing it.

That’s why they invented the term “crossover”.

A SUV is a car…

Its good to hear an oil commodities tracker sees the writing on the wall. I live in the Princeton area of NJ and I am shocked how many Teslas I see daily. I also spot a few Bolts and Leafs. Now the long range Leaf is coming out and if it is $36,000 and beats the $35,000 Model 3 out the door I expect to see many of them. I can’t wait to see the first gas station in my area go under. Sad for the owner but that would be a happy tipping point.

I think Norway, Netherlands and other countries with good plug-in market share are already experiencing that in a visible way. But not only. In Italy for example the fleet of BEVs and PHEVs is still ridiculous, but gas stations went down from 22.900 in 2012 to 20.750 in 2016. We don’t have updated data but that number surely dropped again, I saw quite a few stations in my area closing in the last years. In 2019 and even more in 2020, that business will start to suffer a lot.

Gas stations fell ~50% in the US over a couple decades before EVs ever sold in meaningful numbers.

And may they continue to do so in greater numbers.

If Tesla wants to have an effect on world oil consumption, then Tesla needs to come up with a transportation product that is affordable to developing 2nd and 3rd world mass consumers (where all the oil demand growth will be coming from). That product appears to be nowhere on Tesla’s radar.

/.. and then, Tesla needs to come up with a petrochemical feedstock substitute — good luck with that

https://oilprice.com/Energy/Crude-Oil/IEA-Plastics-Will-Replace-Fuels-As-Oil-Demand-Drivers.html

That product will likely be the compact Tesla car that will rival the Volkswagen ID Neo. First the Model 3 short range needs to come out, after that the focus will be on Tesla Model Y, Tesla Semi, Tesla pickup, Tesla Roadster, Energy division… and only then that car will be built.

If it was for Tesla, they would have already made a $20.000 car that (nearly) everybody can buy, but they need the money for that, so in the meantime Tesla will greatly expand in other segments anyways. Profit is their first priority now, Tesla’s mission depends on that.

Not really, most cars are sold in the US, EU and China so that’s where the focus is…

….while the clunkers are exported to the third world so not much point in developing products for markets that can’t afford new cars anyway.

Luckily electric cars aren’t limited to Tesla. If you travel to China you will notice that something has happened there. All small motorcycles are electric and they’re also making cheap cars for the people there. If you don’t have to sell to picky European customers you can make a cheaper car. In populated areas you rarely need huge battery packs either.

…and they’re also making cheap cars for the people there.

FMVSS is also relaxed there, those cheap cars will not pass EU or US safety standards.

tesla is not the only car manufacturer. Chinese and indian companies will make that happen for 2nd and 3rd world. lets fix our shit first in the first world. once we change batteries from a technology to commodity, market will switch very fast in high density asian countries like india and south east.

Thirld world mass consumers will drive electric two wheelers that are cheaper to own than the ICE counterpart… 😉 Then they will move into cheap and fairly short range 3- and 4-wheelers.

Or ride the electric buses or other mass transit systems running on electricity….

There you go. Arcimoto may have potential in this space as well.
/and the biggest slice of this 2nd/3rd world pie is on 2 wheels — taboo for Musk, apparently

The more expensive the car, the higher the profits, and the faster production can be ramped. What good would an inexpensive car be if the profits are so low that it takes 20 years to make 100,000 of them?

This logic is not so logical. A gallon of gas consumption is a gallon of gas consumption. It knows not where or how it is consumed. Tesla went were the technology and pricing has led them for the most part. The next stops are the best ones at this juncture: pickups, CUVs, and Semis. There are all high consumption, high power and relatively high cost vehicles.

Tesla is going towards an affordable EV at max speed.

We need dozens of GWhs of battery production.

too bad that Buffet or some other billionaire does not invest a 10-20 B into Tesla’s factories.
Could make it so that Tesla expands fast.

I don’t think Telsa has to make that car. All they have to do is create the market for EVs. They have to make it a cool aspiration. They have done their part. Now the Nissans and VWs and BYDs and Mahindra’s of the world need to move it downmarket. We are going to need lots of EV makers.

oil companies are responsible human beings
(in mathmatics a dead planet earth is still 100%)

We’re still at a point in this transition where we shouldn’t expect to see a correlation between EV sales and oil prices. Worldwide, EVs are still a very small percentage of vehicle sales, and the shift to ever-lower-MPG vehicles, at least in the US, tends to offset the lost gasoline sales from EV adoption. But in time, this will change, and things will get quite interesting. Gas stations will close and vehicle purchase patterns will change, but not in geographically and demographically uniform ways. Urban areas will lose more gas stations and see higher EV adoption than rural areas, just to pick two obvious effects. I also expect to see car dealerships consolidate and close, in line with that recent NADA mid-year report that said in the US car dealers’ profits are exactly 25% new car sales, 25% used car sales, and 50% service. Cut heavily into that 50% and a lot of marginal dealers will go under. (Similarly, I don’t see a bright future for car parts stores, which are packed to the ceiling with parts EVs don’t have.) This is why I keep stressing here in comments that the disruption of the rise of EVs, the rEVolution as… Read more »

In about 10-15 years, rural ICE drivers will have range anxiety, wondering where they will fill up, when visiting relatives in the big city or taking a trip cross-country. Of course they can always strap jerrycans full of gas to their bumpers.

Perhaps they will begin to display gas stations on screen, like Tesla does chargers, to allay buyer concerns.

According to a Bloomberg analysis:

“We found that electric vehicles could displace oil demand of 2 million barrels a day as early as 2023. That would create a glut of oil equivalent to what triggered the 2014 oil crisis”.

The oil exporting countries will have to fight over a piece of a progressively shrinking pie.

With the impending electrification of all drivetrains from 48v to full electrics oil has 2 years to play dumb.

Chris, did you mean this nice little Bloomberg EV and Oil video?
https://www.youtube.com/watch?v=jwHN6QQWv2g

Yep that’s it, thanks. There is also a written article with the same content but I won’t bother with a link as that will go in moderation limbo.

But reality is even in California gasoline usage has actually been still increasing due to economic growth of the state.
It just hasn’t grown as much as it would have because of EVs that’s the difference between fluff EV piece and actual facts.

Except for the coming recession, by no way do you see EV impact gas/diesel nation wide USA by 2023.

Some Refinery’s were already converting to more diesel , less gas, more due to EPA/Cafe mpg than impact of EVs

I think a conservative estimate is that each car with a plug (BEV or PHEV) displaces 10-20 barrels of oil consumption per year. So this year’s EV production in the US displaced approximately 4 to 7 million barrels of oil production. US daily transportation consumption is about 14 million. So unfortunately EVs are putting much of a dent in oil consumption yet.

Wait for it….

So a .14% reduction in annual US oil consumption. May not look like much, but it means oil is not a growth industry. Any smart investor will get out of oil now and into the future (EVS, battery manufacturing etc.)

Through December 2017 California had a total of 365,000 Electric cars and Electric Hybrid Plug- In cars.
The total for the US was 764,000.
Using your 10-20 barrels of oil.
It would amount to 3,650,000 – 7,300,000 for California alone.
It would amount to 7,640,000 – 15,280,000 for the US. If we add I the 4-7 million you said for 2018.
The overall total for US becomes 11,640,000 – 22,280,000 barrels of oil. So it looks like EV’s are already eliminating a days worth of oil in the US.

1st 1/2 ton EV Trucks come online then we’ll know.

One thing for sure is that as we get closer to peak oil demand, peoples estimates concerning when it will happen get closer too.
I think we are already there it’s just that people don’t realize it yet.

Your estimate may be spot on. Global growth is slowing while most 1st world countries are working to reduce carbon emissions. Anything close to a recession will eliminate the growth in oil demand for a year or three Heck I bet the government furlough in the US reduces oil consumption by a total of 5-10 million barrels of oil.

You are probably a lot more right than most of those estimates. However, ICE vehicles growth is still happening everywhere except in the west, and inefficient Trucks/SUVs are booming EVERYWHERE. As such, MPG WILL drop for a bit.
So, we are probably about 2-4 years before hitting peak. BUT, we are real close to it.

Most importantly, in the west, the number of ICE cars are now decreasing. The reason is that EVs are at least 2% of all sales and rising. 2019 will likely be over 4, if not 5%, EVs.
For the west, these EVs are replacing ICE, so, ICE in most western nations are already decreasing.

In China, Most new cars are adding to their fleet. As such, their fleet will not start going down, until EVs are at least 50% of all new cars.

China is requiring a percentage of sales to be NEV’s and that percentage is increasing each year. So China sold the most EV’s last year and will continue to increase sales each year.

Globally sales of cars rise by about 2 mln cars a year. At the moment EVs do not grow by 2 mln a year so unfortunately the number of ICE cars is growing. Also, let’s not forget that sales of SUVs are growing at the expense of smaller, more efficient cars. So while it is good to see some progress in EV sales it is way too early to celebrate.

I haven’t seen anything about that do you have a link with information.
Note search the web looking to see if I could verify information. Thanks

~100M vehicles are sold / year globally.

I got this wrong. I thought it was 100M, but your link below says 80M.

https://www.statista.com/statistics/200002/international-car-sales-since-1990/
This has passenger car sales globally from 2015 through December 2018

You are correct that the TOTAL global fleet is still growing at around 2% (~100M vehicles / year) and yeah, EVs does not reach that 2%. So, the fleet growth means that ICE is still growing. And yeah, Truck/SUVs are on the rise EVERYWHERE. However, by end of 2019, the EVs SHOULD be at least 2% of global sales. At that time, we are looking at total emissions being flat or going down.

However, the western Fleet’s ICE, esp. America’s, IS going down.
In fact, when I looked at the Rhodium study, it showed that emissions from gas vehicles is DOWN, not up.
Rail increased as well, but because they are moving towards LNG, their emissions actually dropped slightly.
What is up is diesel for trucking/jets due to the booming economy.
But, Tesla’s and other Truck makers, are moving towards EVs.
I fully expect over the next 3-4 years for America’s emissions to plummet in spite of Trump.
And Europe’s will continue downwards.
The problem will be China’s. They will continue massive growth in GHGs until the far left start screaming about it.

China is the leader in renewable energy and EV’s and were buying LNG from the US until Tariff man started his war.
China has 4 times the population 1.3 billion to 350 million in US.

China is neither leader in AE or EVs.
They are currently manufacturing the most AE, but most all of it is for export.
Nearly ALL of the research on AE comes from America (though China loves to steal it).

The number of EVs, being produced in CHina is above America, but not by that much.
And considering that they have ~4.5x the ppl, they are actually pretty low.
BTW, it is ~1.4B vs 325 million.

And again, when it comes to R&D on EVs, China is behind EVERYBODY .
But, they will either steal it, or demand more patents from idiots running legacy car makers.

There were 72.61 million cars sold in 2015. That figure has been rising by over 2 million cars every year since. That includes plug-in hybrids and fully electric vehicles. Sales of all types (ICE, hybrid, plug-in, and fully electric) are continuing to rise. When fully electric and plug-in vehicles will start the downward trend of ICE and hybrid sales is anyone’s guess. It won’t be soon.

.

https://www.statista.com/statistics/200002/international-car-sales-since-1990
This has global passenger car sales 2015 through 2017 and estimate for 2018.
If you want to see more you would have to pay them.

Wait for the Tesla Semi:)

Not just Tesla. There are other Tractor makers that are headed towards EVs.

Well on Statica web site they estimate 80,850,000 passenger cars were sold in 2018. The estimated number of Electric and Electric Plug-In cars sold were 2,000,000.
So global EV sales are 2.5% of all passenger car sales in 2018.