London – 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 small 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.
Both ExxonMobil and BP, for instance, predict that in 2035, less than 10 percent of new cars will be electric vehicles or plug-in hybrids.
The carmakers don't produce comparable long-term outlooks for vehicle production but their nearer term predictions for vehicle roll-outs envisage a much faster take up of EVs.
Mercedes Benz CEO Dieter Zetsche recently said his goal was to have EVs make up between 15 and 25 percent of group global sales by 2025. BMW has said it could do the same. Ford CEO Mark Fields said in April that by 2020, 40 percent of models would be electrified.
Why do the views of oil companies and carmakers differ so greatly then? These are some of the main reasons:
The Oil View: BP, Exxon's oil market outlooks published this year do not mention driverless vehicles. The International Energy Agency said it had not yet studied the impact of autonomous driving on oil demand.
What the carmakers say: Driverless vehicles will become a significant part of sales toward the end of the next decade. They will account for an even larger share of miles driven, since the technology is expected to lead to a reduction in car ownership and increase in the use of taxi or ride sharing services, with vehicles often operated as part of fleets owned by carmakers or other companies.
Carmakers say electric vehicles are more suitable platforms for such autonomous vehicles than petrol or diesel powered cars. EVs are also seen as attractive for fleet owners since high utilisation rates make their lower operating costs attractive and because the fewer moving parts in EVs, compared to combustion engines, means less maintenance is required.
The Oil View: "There remains a significant degree of uncertainty surrounding how BEVs will overcome limitations related to price, range and ease of charging," OPEC's 2040 outlook, published in November said. BP said in Feb that it was unlikely batteries could compete with oil in cost terms before 2035.
"Penetration of electric vehicles and electricity more generally is likely to be pretty limited over the next 20 years. That's based on the analysis contained in the Technology Outlook published last year, that it takes time until battery technology is able to compete" said Spencer Dale, BP Chief Economist.
What the carmakers say: Battery charging times are falling to less than an hour, and General Motors' new 2017 Chevy Bolt is the first of several EVs planned for the coming few years with a range of 320km.
Battery costs are dropping too. Ford expects them to become cost competitive with internal combustion engines by 2025.
COMBUSTION ENGINE EFFICIENCY
The Oil View: The most cost effective way to reduce emissions and increase the energy efficiency of vehicles is through continued improvement of combustion engines and adoption of hybrids. "Improving fuel economy in petrol-fueled cars is one of the most cost-effective ways to reduce GHG emissions, especially when compared to electric cars," Exxon's 2040 outlook, published earlier this year said.
What the carmakers say: It is becoming harder and more expensive to squeeze efficiency gains from combustion engine technology.
"It is also important strategically to ramp up the electric vehicles to meet the CO2 2020 targets. Without electrified cars, you can't meet 2020 targets in Europe, for example, and other parts of the world," BMW chairman Harald Krueger said in August.
The Oil View: Electricity is likely to be unsuitable for powering light trucks and long-distance road haulage in coming decades. "The distances travelled and loads transported greatly increase the demands made on electric batteries, making an early electrification of these markets less likely," BP Group chief economist Spencer Dale said in early December.
What the carmakers say: Some car companies including Daimler, Nissan and Volvo say electrification is picking up in commercial vehicles. Ford said rules that often exempt electrified commercial vehicles from fees for accessing city centres are driving interest in electrification among fleet owners. "It is a sector that is very conducive to electrification," said Ford's Hau Thai-Tang.
The Oil View: Increasing car ownership in emerging markets like China will drive growth in oil demand over the coming decades. BP predicted a 63 percent increase in Chinese oil consumption – which it put at 12 million barrels last year – by 2035. Chinese motorists are unlikely to want to buy the expensive EVs beloved of many affluent western consumers.
"EVs are not likely to be a game changer for the growth of oil demand over the next 20 years, where the increasing prosperity in emerging Asia is likely to swamp the impact of even a very rapid increase in electric cars," said BP's chief economist Spencer Dale.
What the carmakers say: China is offering large incentives to encourage consumers to buy EVs and expected Chinese demand is driving GM's plans to roll out 10 new electric vehicles, GM CEO Mary Barra said in October.
Beijing is also pressing Chinese carmakers to be leaders in developing EVs. "That's a very critical aspect of the strategy that the Chinese government has for its own automotive industry," Bob Shanks, Ford CFO, told investors last year.