Recently I wrote an article in which I pointed out that BP (NYSE:BP) planning assumed that there would be negligible uptake of EVs by 2035. This echoes Exxon Mobil's (NYSE:XOM) view of EV uptake by 2040 and also the view of OPEC, which projects 1% EV uptake by 2040.
I argued that all of the evidence suggests that these views held by the oil industry made little sense when compared with 235,000 orders for the Tesla (NASDAQ:TSLA) Model 3 EV in the first week of orders, GM (NYSE:GM) to release its budget Bolt EV in 2016, Volkswagen (OTCPK:VLKAF) and other car companies all touting upcoming EVs with a range of at least 200 miles, and moves by Norway and India to ban cars and other vehicles with internal combustion engines by 2025 and 2030 respectively.
I didn't realize that the oil industry was actively involved in trying to block development of the EV industry, but this seems to be the situation in California at least, where there was a dramatic increase in lobbying spend by oil and gas companies in the lead up to consideration of the Clean Energy and Pollution Reduction Act. A clause to require 50% reduction in petroleum use by vehicles in California by 2030 was removed.
Given the pace of EV adoption, it isn't clear that whether or not this clause has been enacted will matter. The point to consider is why would an industry body try to stop the inevitable? It hasn't worked out for the coal industry. It didn't work for Kodak.
There are many reasons why EVs are a threat to fossil fuel power generators and this doesn't relate to just the oil industry. What if battery storage became available at a huge discount to new build? How would it impact on the economics of wind and solar power generation to be able to access huge storage capacity? This is exactly what has been projected by the German Renewable Energy Federation for use of batteries retired from EVs. Their report suggests that 1000 GWh of storage from used EV batteries will become available worldwide by 2030. I interpret this to mean that power generation from gas will come under further challenge from renewable energy.
A recent article in the Financial Times had 3 dramatic datasets from 2010 to 2015/2016 for BP, Exxon Mobil, Chevron (NYSE:CVX) and Shell (NYSE:RDS.B). These show decline in net income since 2011 and decline in capex from 2013 to 2016. Curiously, all 4 companies showed steadily increasing dividends since 2010. This looks like living in denial…
It is a pretty interesting time to be an investor in the energy space. Traditionally, conservative investors have chosen energy stocks as safe havens for their retirement savings as they have appreciated in value and paid good dividends.
I suggest that there are signs of demise of the coal industry and in the oil industry currently, with denial of likely future developments and active attempts to bolster the status quo.
The coal industry crash has had a devastating effect on many investor portfolios. I suggest that there is still time for investors to consider whether oil stocks, even though they are huge corporations, are in danger of following the coal industry into severe and rapid decline. And don't be complacent about gas either. It is strange to think that electric cars may become a key trigger for the end of the fossil fuel industry.
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