Bloomberg Vs. Navigant Research: Will EVs Produce A New Oil Crash? When?

Summary: In this article, I correct, update and extend the information contained in a previous contribution to put Bloomberg’s hypothesis that EVs will produce a new oil crash under scrutiny. The findings provide considerable support to this line of reasoning albeit conclude that the crash is likely to occur not by 2023 but by 2024. Here two game-changers can be identified: BEVs and electric buses. They would both account for almost 2/3 of the oil consumption reduction. It’s concluded that not one but many Li-ion battery gigafactories will be needed, and that much more lithium than expected will also be required in the years to come.

In recent days, there has been a great deal of discussion about the possibility that electric vehicle [EV] sales will produce a new oil crash. A series of reports by Bloomberg are at the center of this controversy. One can find them here and here. These views have been put into question by navigant research and summarized by green car reports.

Somewhat surprisingly, Bloomberg's contentions reinforce at least two of the views I put forward last year in another article.

First, that the worsening of climate change would have prompted the electrification of the automobile industry in the world as reflected in a decreased demand for diesel and gasoline which is likely to intensify in the years ahead as Tesla's (NASDAQ:TSLA) Li-ion battery gigafactory and other carmakers' gigaplants are introduced into the market.

Second, that even though oil prices won't fall forever, their recovery will take some time and it's highly unlikely that we will return to business as usual, which would nonetheless keep the incentives for persisting a search for substitutes intact generating a new downward impulse for the demand for oil.

Now, the main thrust of Navigant Research's arguments resides in four points. One, conventional vehicle fuel efficiency is meant to increase 22% over the next decade resulting in significant oil displacement to belittle the oil displaced by EVs. Two, autonomous vehicles will also tend to increase fuel efficiency on the roads further contributing to displacing oil. Three, assuming oil prices stay in the $40-$80 range for the next 10 years, conventional hybrids are likely to win the energy cost equation over electric drive. And four, low oil prices may lead to reforms which will have a negative impact on EV sales.

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Alpha Stockman 5 years ago Member's comment

Excellent work as always.