Opec and the oil barons face a slow death by electrification

Ambrose Evans-Pritchard  July 27, 2017  smh.com.au/business/energy

Opec, Russia and Big Oil thought they had half a century to prepare for the end of the internal combustion engine. At best they have a decade before the threat turns deadly serious.

The twin announcement by France and Britain - within two weeks of each other - to ban sales of petrol and diesel cars by 2040 is an earthquake in the energy world.

The switch to electric vehicles could soon turn into a stampede as prices for electric and fossil cars reach parity. 

Others are moving in parallel. A non-binding resolution of the German Bundesrat [its upper house of parliament] has called for a prohibition by 2030. Norway already has such a target by 2025 and the catalytic effect is spectacular: sales of electric vehicles (EVs) reached 42 per cent of all cars in July.

China's new plan stipulates that zero-emission vehicles must make up 8 per cent of total sales next year, rising to 10 per cent in 2019, and 12 per cent in 2020. This is an even bigger earthquake. Those German and Japanese manufacturers that do not yet produce EVs - or not enough - face being shut out of the world's largest car market.

Once governments reset policy in this fashion, markets rush to take advantage. They accelerate the timetable. The inevitability factor turns against the status quo and shifts with pent-up force in a new direction.

Morgan Stanley expects EVs to capture 70 per cent of the European market by mid-century. On the one hand it costs ever more to develop fossil-fuel cars that meet tightening rules on CO2 emissions and particulates (NOx). On the other, the cost of electric batteries keeps falling.

The scissor-action is remorseless.

In Britain and France we will start to see charging outlets appearing rapidly as they have in Norway, instantly located when we need them on iPhone apps. The utilities are already locked in a battle for mastery of this electric revolution, fighting for control of lucrative plug-in posts expected to jump from 100,000 to 30 million within three decades.

Switch to electric will turn into stampede

My guess is that petrol stations will go into run-off and become scarce in culturally-green hotspots relatively soon. Spare parts for fossil-fuel cars will be less easy to find. As these supply risks seep into public consciousness, the switch to electric vehicles will turn into a stampede. The National Grid estimates that there could be 6 million electric vehicles in Britain by 2030 under its "Gone Green" scenario.

Tesla's mass-market Model 3 will be launched this Friday at a starting price of $US35,000 ($43,725) and a battery range of 215 miles (346 kilometres) , with a target of 1 million sales annually within three years. In China, the Chery eQ already sells for under $US9,000. Even without subsidies it would be less than $US15,000.

Opec and the petro-powers are facing death by electrification.  Photo: pagadesign

There will be 20 models with a 200-mile range in the US market alone by 2020. Sweden's Volvo will by then have stopped producing petrol cars entirely, citing a customer revolt against petrol vehicles.

The argument at the big global banks has shifted from whether peak oil demand will occur to how soon it will occur. Goldman Sachs said this week that it could hit by 2024 in "an extreme case". That is not extreme enough for Tony Seba from Stanford University and RethinkX.

It is what happened to Kodak when digital cameras appeared. The end was swift and brutal.

He says the technology is moving so fast that the British ban will be overtaken long before 2040 by pure market forces. Michael Gove, the Environment Secretary, might just as well ban horse-drawn carriages. There won't be any petrol or diesel cars left on the road anyway.

Price parity in five years

Professor Seba thinks EVs will reach cost parity within five years as prices fall below $US20,000 (versus $US24,000 for the average oil-based car today). Thereafter they will sweep the field on cost alone. With far fewer moving parts and a potential lifespan of half a million miles, they will render the combustion engine obsolete.

It is what happened to Kodak when digital cameras appeared. The end was swift and brutal.

Opec will hear none of this. It allows that renewable energy may be a threat to coal but insists that it cannot seriously menace transport fuel. It says fossil fuels will make up 77 per cent of world energy supply in 2040, exactly the same share as today, and the Paris Agreement be damned.

Its World Oil Outlook estimates that crude demand will rise by a further 16.4 million barrels per day (b/d) to 109 million b/d by then, supposedly driven by economic booms in China and India. The global fleet of passenger cars will rise from 1 billion to 2.1 billion but Opec is adamant that only 6.7 per cent of these will be EVs.

It is still an article of faith that haulage and trucking cannot be electrified at viable cost, but this too is absurd. Of course it can. Nikola Motor Company in the US has already unveiled an 18-wheeler with a Tesla battery that can run for 1,200 miles (1,930 kilometres) with the help of a hydrogen fuel-cell generator.

Dirty bunker fuel for the 700,000 ships afloat is next in line. Scandinavia already uses electric ferries for short trips. Diesel-electric motors driven by liquefied natural gas are expected to capture a chunk of the market.

Electric planes

Boeing is even working on electric aircraft for short-haul commuter flights. One by one, the arguments are crumbling.

My own view is that we now have an unstoppable confluence of market forces, new technology and green policies that are reinforcing each other and cannot be stopped even by Donald Trump.

The latest climate research suggests that ocean acidification is worse than feared and that the world's safe carbon budget is less than supposed in the Paris Accord. It is a near certainty that some form of carbon tax or pricing will become a global fact of life.

For Opec and the petro-powers it has turned into a running three-year disaster.

Window closing very fast

Not only do they face slow death by electrification, they face a nimble US shale industry in the short run that seems able to turn on production almost at the flick of a switch whenever crude pushes back above $US50 a barrel.

Recoveries are quickly capped at half previous price levels, and at levels far below the fiscal break-even cost needed by Saudi Arabia and most Opec states to maintain their cradle-to-grave welfare systems and patronage machines.

Little wonder that Crown Prince Mohammed bin Salman is so determined to sell off the crown jewels of Saudi Aramco and reinvest the proceeds in an industrial and economic reinvention designed for life after oil. The window is suddenly closing very fast.

The British and French announcement that they will not require a single drop of crude must have sent shivers through a lot of mid-East spines.

Which begs a question: why would anybody purchase shares in a company like Aramco that was valued at $US2 trillion in an old energy order that no longer exists?

The Daily Telegraph, London

 

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Yes, but few people are buying EVs.   Of course some do but most are buying hybrids which had on board engines to charge or provide electricity to the drive system.  There are very few pure electrics, Tesla being one.  So what are governments going to do when the market does not suppor their position electric vehicles?  It is going to be interesting.  What company is producing the all electric truck, by that I mean semi tractors not pick up trucks (BTW I have not seen any hybrid trucks yet, either).  We have a long way to go before we see all electric vehicles on the road, if ever.

Yes, EVs are still relatively scarce but the public is just now getting the chance to purchase vehicles with the range required by most drivers.  And although there are currently more hybrid light duty vehicles, the majority rarely visit a gas station so the effect on oil demand is the basically the same as a true EV.  Government has an impact on the market only as far as rebates which are scheduled to decrease and disappear over the next few years.  Most projections are that EVs will be competitive price wise with combustion engine vehicles by that time.  There are several E Pick Up Trucks in the works, see here following links.

http://www.businessinsider.com/the-bollinger-b1-is-the-coolest-elec...

http://www.businessinsider.com/workhorse-ceo-electric-pickup-truck-...

And Tesla has an 18 wheeler in the works.  The heavy duty truck chassis configuration actually is ideal for a large battery.

https://electrek.co/2016/07/20/tesla-semi-truck-business-cargo/

I expect to see some version of all these trucks this decade.

NISSAN GETS OUT OF E-CAR BATTERIES

Nissan Motor Co. agreed to sell its battery business, including its U.S. operations, to a Chinese investment firm, setting the stage for a potential ruling by a U.S. regulator on the transfer of sensitive technologies, writes Sean McLain.

“The buyer, GSR Capital, agreed Tuesday to buy the majority of Nissan’s electric-car battery operations for an undisclosed sum. The deal, which the parties said they expected to close by the end of the year, includes Nissan’s battery- manufacturing operations in Smyrna, Tenn.; Sunderland, England; and Japan,” the Journal reports.

Batteries are a hot area for leading car makers that plan to boost sharply the proportion of their sales coming from electric-powered cars.

Nissan is exiting the electrical battery business because the firm says it is cheaper to buy them from external vendors.

Tesla to test self-driving semi-truck in California, Nevada

Nathan Bomey, USA TODAY Published 10:21 a.m. ET Aug. 10, 2017 | Updated 5:06 p.m. ET Aug. 10, 2017

Tesla is poised to begin testing a self-driving semi-truck in an advancement that could help revolutionize shipping, according to multiple reports.

The Silicon Valley automaker met with transportation department officials in Nevada in June about its plans to test a driverless truck crossing between the states, according to a document obtained by Reuters.

The company also met Wednesday with Department of Motor Vehicles officials in California to discuss plans for electric trucks, DMV spokeswoman Jessica Gonzalez said.

But Gonzalez said in an email that "no one can test 'autonomous' trucks in California at this time."

Tesla has long planned to reveal an electric semi-truck at an event in late September with production launching within two years. But details about the vehicle's driving system have not been reported.

Tesla did not immediately respond to a request seeking comment Thursday morning.

Nevada DMV spokesman Alex Smith confirmed that the agency met with Tesla in June but declined to provide details.

"It's going to be a cool product and will defy people's expectations on what an electric truck can do," Tesla CEO Elon Musk told investors in May.

Auto industry experts have long expected that autonomous vehicle technology will roll out widely in trucks before other vehicles. That's because highway driving is much more predictable than city driving, making it easier for a self-driving suite of sensors and cameras to handle the ride.

The document obtained by Reuters indicated that Tesla is planning to test trucks without anyone in the cab, which would require special government permission. The company also reportedly plans to test the trucks in a platooning manner, which refers to a strategy of ensuring the trucks travel closely together.

"Platooning has the potential to significantly reduce the running costs for truck operators and is an easier bridge to a practical, commercial semi-autonomous application in the early 2020s," Evercore ISI analyst Arndt Ellinghorst said Thursday in a note to investors.

"However, the timeframe during which even platooning can safely be delivered without a driver in the vehicle remains to be seen and we believe, as per other autonomous technologies, that deployment with full 'hands-off and eyes-off' will take longer than many anticipate."

Opec and the Oil Barons will be smiling all the way to the pump when the subsidies eventually dry up.

http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-st...

The cost to produce an EV with an acceptable range will be competitive with combustion engine cars by the time the subsidies expire.

Oh ok.  For those of you old enough to remember we were supposed to be driving "flying cars" in the 70's.  Personally I don't see people being yanked out of their gas powered cars by the millions that quick.  Also these pronouncements by govts does not say only electrically powered cars.  Just some that not only have gas power but also some form of hybrid propulsion if I'm not mistaken.  I don't know why people don't understand that the electricity comes out of thin air.  It has to be generated, and in the case of China by mostly coal powered plants.  They did a study and found out the electric powered cars were just as polluting because of the source.

John, unfortunately I am plenty old to remember the Jetsons however flying cars in the 70's were science fiction, not serious projections of the near term future.  Yes, electricity must be generate by some other power source.  China has very ambitious plans to build generation from sources other than coal.  It's not just lip service, look at the air in their major cities.  Yes, hybrid drive vehicles have a combustion engine but for the vast majority of drivers that engine is rarely used.  Most hybrids run for weeks, if not months, without visiting a gas station.  Once natural gas displaces coal and more energy comes from renewables the carbon foot print of electric vehicles will be greatly reduced.

Maybe I am where my age clouds my memory but it was supposed to be more than science fiction.  I must dispute the point where the gas engines are rarely used.  Under certain conditions like high heat and cold weather the efficiency of the hybrid system deteriorates   to the point where the gas engine has to run a lot more.  My friend who swears by his Chevy Volt who I recently visited in Houston ran out of pure electric power quickly and the gas engine was necessary.  I sell fords in Lafayette and we do sell a few hybrids and I've noticed comments that although they are good still not without their faults.

   The other thing being conveniently overlooked is the ecological logistics of getting rid of the worn out lithium batteries.  could be just as big of a pollution problem too.

    Let me be clear though.I have been supported by the oil and gas business all my life so you could say I'm biased.  My family had a chain of service stations in Houston.  Now after moving to central Louisiana and being involved in the leasing and hopefully production of the business, I'm really appreciative of what this business has done for me.  The new cars now with their emission controls now produce carbon dioxide which helps the vegetation.  I am a fan of the internal combustion engine also.

So yes drill baby,drill; but in a responsible way!

My father owned gas stations during my growing up years and I worked at them in the summers.  I think the Volt is old technology now and Chevy is pushing their Bolt as opposed to focusing on hybrid drives.  I agree on the challenges inherent in lithium-ion batteries but there are new and improved battery designs in the works.  I have read several recent articles on alternate battery tech, here is one.  Being a type of landman, I owe my job to the O&G industry however since I represent land and mineral owners and work to protect their interests while encouraging where possible the drilling of wells to monetize their mineral rights.  I agree to doing so in a responsible way.

Lithium-ion batteries finally have a rechargeable competitor

Tsvetana Paraskova, OilPrice.com  Aug. 13, 2017, 1:04 PM

The rise of electric vehicles and the quest to find solutions to energy storage for the renewables industry have created a breeding ground for tech experts to develop battery technologies.

Last week, Sun Microsystems co-founder Bill Joy and the company he currently backs, Ionic Materials, unveiled a solid-state alkaline battery design that they claim would be cheaper and safer than the lithium-ion battery.

“What people didn’t really realize is that alkaline batteries could be made rechargeable,” Joy told Bloomberg in a phone interview last week. “I think people had given up,” Joy noted.

The three main possible applications of the new alkaline battery technology would be consumer electronics, electric cars, and energy storage for the power grid, according to the developers.

However, also according to Joy, the company just has the material, and the technology is not ready to go commercial right away. The rechargeable alkaline battery technology could be ready for commercial use within five years, Joy told Bloomberg, adding that Ionic Materials didn’t have a factory to manufacture the tech.

The prototype designs have demonstrated up to 400 recharge cycles for the alkaline battery, and Ionic Materials believes that the number of recharge cycles could be tripled, the New York Times reports.

On the downside, apart from uncertain commercial future, is the fact that Ionic’s first alkaline batteries would be heavier than the lithium-ion batteries today.

Alkaline batteries mostly use zinc and manganese.

Ionic Materials has made progress toward developing a design for an alkaline battery that would use cheaper aluminum instead of zinc, Joy told the NYT. Aluminum-based alkaline designs could potentially weigh less than lithium-ion designs and could be cheaper than the alkaline designs today, according to the NYT.

A small volcano in Argentina is about to fuel the next tech boom – and a little known company is going to be right at the center. Early investors stand to gain incredible profits and you can too. Read the report.

“They use an unusual electrolyte to come up with a battery that uses common cheap materials and is benign,” Amory Lovins, the founder of non-profit sustainable energy research group Rocky Mountain Institute (RMI) -- at whose summit Ionic unveiled its technology -- told the NYT, referring to the company.

However, Lovins is cautious about forecasts whether the alkaline design would be such as to hit the mass market.

“Batteries are very difficult and I want to see what they have and what can be measured and proven and whether it will get to market,” Lovins told the NYT.

Meanwhile, lithium-ion battery prices have dropped a lot over the past few years. According to Bloomberg New Energy Finance (BNEF), the lithium-ion battery pack prices dropped from US$1,000/kWh in 2010 to US$273/ kWh last year.

Large demand for lithium-ion batteries is predicted ahead, with BNEF expecting EVs sales to accelerate and make up 54 percent of new car sales by 2040. One of the main drivers of EV growth, according to BNEF, will be tumbling battery prices.

“The real take-off for EVs will happen in the second half of the 2020s due to plunging lithium-ion battery prices, which are set to fall by more than 70% by 2030,” according to BNEF’s Electric Vehicle Outlook 2017.

EVs adoption and the need to find energy storage solutions will charge the battery race in the years and decades to come. The key question here is, will the battery design breakthroughs turn from lab tests into viable mass market energy options?

Read the original article on OilPrice.com. Copyright 2017.

 

Lot of "pie in the sky" there.  Being a "foot soldier" in the automobile business I find the average customer is more worried about whether a car will stop itself of how many cup holders it has than where the latest battery technology is.  I appreciate your duty to know what the future holds as far a s the value and/or future value of how societal changes will affect their prospects on getting suitable values for their properties. 

  By the way we've heard that the Eagles Nest is both oil and gas producing whereas I always thought it was primarily oil.  Maybe that's part of the reason for the increased interest?  By the way the Bolt is selling very poorly although it seems to be a good product.

The Eagles Nest?  Is that in Lafayette?  :-)  The Bolt, for all it's refinements, is still a small car with a funny look.  Tesla has full size vehicles that are stylish and they have amazing performance.  Some of the other EV start ups also have really great styling and performance.  Those are high end models.  All will depend on advancing battery technology and charging networks.  The Tesla Model 3 will tell us a lot about what the buying public will spend their hard earned dollar on by the end of 2018. 

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