Many carmakers are predicting a significant shift to electric vehicles in the next decade. Advances in battery technology and the growth of autonomous driving and ride sharing – suited to electric vehicles – will power this expansion, they reason.
But some oil executives take a different view, predicting electricity will play only a bit part in transport out to 2040 at least. If they are on the wrong side of the argument, it could come at a cost to an industry where new projects often cost billions of dollars to build and need decades of at least moderate crude prices to pay off.
Over half of all crude oil pumped is used for transport. An overly pessimistic outlook for electric cars may lead oil companies to adopt an overly optimistic outlook for oil consumption and price growth, analysts say.
ENI SpA (ENI.MI) Chief Executive Claudio Descalzi is among those who believe the threat posed to the oil industry by electric vehicles is not significant.
“Electric cars, they can grow, but I don’t think that is a problem (for us),” Descalzi told Reuters on the sidelines of a conference in London last month.
ExxonMobil Corp(XOM.N) , the largest western oil producer by market value, and British rival BP Plc (BP.L) publish oil market outlooks to 2035 and 2040 respectively that guide their investment decisions.
Both predict that in 2035, less than 10 percent of new cars will be electric vehicles (EVs) or plug-in hybrids – cars with a backup combustion engine for when the battery runs flat.
“Our central view in the outlook is the penetration of electric vehicles and electricity more generally is likely to be pretty limited over the next 20 years,” Spencer Dale, BP’s Chief Economist, said in February.