Rise of electric cars challenges the world’s thirst for oil

9 Aug 2017   Electric Cars

In the early years of US oil production in the late 19th century, gasoline was considered a useless byproduct of kerosene that would be burnt off or dumped in rivers. That changed when the first mass-produced automobiles hit the road. But just over a century later, the symbiotic relationship between oil and cars which transformed society is beginning to fray. Recent announcements by the UK and France of plans to ban sales of new petrol and diesel vehicles by 2040 have amplified two critical questions for the petroleum industry: will electric vehicles (EVs) cause oil demand to decline and, if so, when? Executives at the world’s biggest oil companies have offered some answers — sceptics would call them guesses — in recent days, after revealing generally strong second-quarter results which raised optimism about near-term prospects even as doubts grow about the long term. Ben van Beurden, chief executive of Royal Dutch Shell, made no attempt to disguise the challenge facing “Big Oil”. Companies must become more discriminating about which oilfields to develop, he said, with only the most low-cost and productive likely to remain competitive. “We have to have projects that are resilient in a world where demand has peaked and will be declining,” he said. “When will this happen? We do not know. But will it happen? We are certain.” Mr van Beurden said “peak demand” could come as soon as the late 2020s in the most bullish scenarios for EV uptake. But that would require “much more aggressive” policy action on climate change and faster innovation in battery technology than seen so far.

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