China's Electric Buses Will Cut Global Oil Consumption By 0.5%, Trimming Oil Company Revenues And Profits

Apr. 10, 2018 11:59 AM ETXLE, VDE, ERX, OIH, ERY, DIG, BGR, FENY, IYE, DUG, FIF, RYE, PXJ, CRAK, FXN, DDG, NANR, FTXN, JHME, ERYY, ERGF6 Comments

Summary

  • China is projected to have 1.2 million electric city buses by 2025.
  • China’s electric buses will displace 0.5 percent of global oil consumption, trimming oil company revenues and profits.
  • A leading indicator of the changes to come.

From 16,000 e-buses in Shenzhen to 1.2 million e-buses in China

Shenzhen has converted its city bus fleet to an all-electric fleet of 16,000 electric buses. Authorities there have determined that the electric bus fleet will eliminate the use of 345,000 tons of diesel fuel per year.

China is promoting electric buses to improve urban air quality and cut greenhouse gas emissions. Bloomberg has projected that China will have 1.2 million electric city buses by 2025.

To support the manufacture of electric buses, China has an enormous battery manufacturing capacity—both operating and planned.

China’s electric buses will displace 0.5 percent of global oil consumption

In 2016 the world consumed 97 million barrels of oil per day, or 35,244 million barrels of oil per year. Scaling up the savings of diesel fuel from Shenzhen’s 16,000 electric buses to China’s projected 1.2 million electric buses—and converting the units from tons to barrels—shows that China’s electric buses will eliminate the use of 194 million barrels of oil per year.

Simple division shows that China’s electric buses will reduce global oil consumption by 0.5 percent.

Oil company revenues and profits will be trimmed accordingly

A half-percent reduction in oil consumption will trim oil company revenues by at least one-half percent, if the price of oil remains the same, or by somewhat more if the global demand curve shifts down, resulting in a lower equilibrium price for oil.

Oil company profits per barrel sold will decline somewhat more than revenues, as the fixed costs of production will be spread across a somewhat smaller quantity of oil sold.

Oil company stocks are owned by the Energy Select Sector SPDR ETF (XLE) and the Vanguard Energy ETF (VDE).

A leading indicator of the changes to come

In the world’s transition to 100 percent clean renewable energy, which

This article was written by

Driscoll Consulting LLC makes no investment recommendation in any article. Do not rely on any article in making any investment decision. Owning individual stocks is inherently risky. The stock of any company mentioned in any article may become worthless at any time, e.g., upon company bankruptcy. Or the stock price could soar, or do anything in between. Before making any investment decision, consult a financial adviser and read and understand the company's 10-K and 10-Q reports, the company's financial statements, and transcripts of the quarterly conference calls; identify and evaluate company, industry, economic, and political scenarios and risks; identify the suitability of any investment to your own circumstances; and then make your own decision. The staff of Driscoll Consulting LLC consists of one amateur individual investor with no financial training.  Consequently, Driscoll Consulting LLC's articles, and the assumptions and calculations on which they are based, are likely to have substantive errors, omissions and/or misinterpretations. In fact, Driscoll Consulting LLC has published articles on Seeking Alpha largely in the hope that Seeking Alpha readers would identify any such errors and point them out in the comments section.Driscoll Consulting LLC's articles were not submitted to Seeking Alpha on a "Pro" basis, and there is nothing professional about them.  Driscoll Consulting LLC's articles do not express an opinion on the future or projected value of any financial instrument, and do not make research recommendations (i.e., recommendations as to whether or not to "buy," "sell," "hold," or to enter or not to enter into any other transaction involving any specific interest) or a recommendation as to an investment or other strategy. Each article is derived from selected public sources. Readers should not consider any article as information sufficient upon which to base an investment decision. Nor does any article consider a reader's individual circumstances. Reader, you should determine on your own whether you agree with the content of any article. The author disclaims any liability arising from use of any article.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Recommended For You

Comments (6)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.