Oil and the Electric Car – Who wins?

Talk about a split decision! The future may be right in front of us. This morning there was news that suggested that the Nuclear inspectors that visited Iran did not find any equipment linked to Nuclear Weapons. This somewhat reminds us of the Bush era and the search for weapons of mass destruction. Either way this is good news for Iran (and the world), oil exports, and likely not great news for oil supply. The International Atomic Energy Agency has until October 15th to conclude their investigation and then a couple of months to submit a report. Once this is complete and in good order with world powers, the sanctions against its financial and energy industries will be lifted. Suggestion here is that there is likely more oil on the way to market. Given this, oil appears to be in a bit of a cage match for an extended period.

US RIG count slipped again last week to 644 from 652. This is not a huge move, but it is consistent with the overall weak construct. In Canada, the data seems to have missed a big seasonal spike in the last year and is on a much shallower slope with the likelihood of another miss this year. The chart below illustrates the current utilization of rigs; 4 years of decline and this year will likely post number 5. Technology might have something to say about this trend, but the bottom line remains questionable.

Source: VIP Wealth Solutions and Bloomberg

So what does this have to do with the electric car?

On more than one occasion this past week, the conversation of a Tesla and the pending or potential purchase of said car was tabled. This suggests that the Tesla is not just for California’s environmental surf crowd. The migration is trending north. It is also likely trending east, as Tesla was represented at the recent International Motor Show in Frankfurt. Now Tesla is not the only car in this space, but it was the only one that came up in the few random conversations. The BMW I model was not mentioned or even on the radar of the conversation.

Consider some of the stats:

As of December 2014, over 712,000 highway legal plug-in electric passenger cars and light-utility vans have been sold worldwide since 2003. This represent about 0.06% of the world's stock of motor vehicles, estimated at 1.2 billion vehicles by mid-2014.

The Nissan Leaf and Chevrolet Volt were introduced in December 2010.

Global sales of Electric cars were up 50% from 2013 to 2014.

Frost & Sullivan forecasted that over 480,000 plug-in electric vehicles will be sold globally in 2015, with Europe and China predicted to be the fastest growing markets.

During 2014, six countries achieved plug-in electric car sales with a market share higher than 1% of total new car sales, Norway (13.84%), the Netherlands (3.87%), Iceland (2.71%), Estonia (1.57%), Sweden (1.53%), and Japan (1.06%).

U.S. sales are led by California with 129,470 plug-in electric vehicles registered between December 2010 and December 2014, representing about 45% of all plug-in cars sold in the U.S. since 2010.

What this tells us is that with oil on its knees, the electric car is finding strength. Is this important? We looked to the Energy Information Administration (EIA) for some guidance with regard to the actual uses of oil. As suspected, the primary use of oil is the car. The chart below from the EIA 2013 data gives us a sense of how important the combustion engine is versus the electric engine in today’s terms.

Petroleum products consumed in 2013

1Other includes pentanes plus and other liquids.

Notes: Data may not add to total due to independent roundings.

Source: Petroleum Navigator, preliminary 2013 data.

If the combustion car was removed from the planet, demand would be cut almost in half!

And the Winner is?

Today, oil clearly remains supreme but the headwinds are obvious. The electric car is making headway and Tesla seems to be the clear pure play in the space. In 10 years, the landscape will look different and likely more of us will be driving electric cars and using less oil.

Electric Speed Diversion

Electricity is still fast:

1994 Ford SVT Boss Mustang 10.0L Concept0-60 mph 1.9 Quarter mile 10.5

2002 Chevrolet Corvette (Lingenfelter 427 Twin Turbo) 0-60 mph 1.97 Quarter mile 9.1

2002 Viper Hennessey Venom 1000TT0-60 mph 2.2 Quarter mile 9.4

2014 Porsche 918 Spyder0-60 mph 2.3 Quarter mile 9.9

2012 Ariel Atom 500 (V8)0-60 mph 2.3

2011 Lamborghini Sesto Elemento0-60 mph 2.4

2013 Bugatti Veyron 16.4 Grand Sport Vitesse0-60 mph 2.4

2015 Tesla S P85D 0-100 km 3.0 – with Ludicrous Speed Upgrade

Full Disclosure

None of us own a Tesla.

 

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