Big Oil Losing its Grip on Auto Industry
Citing numerous empirical studies, analysts at Bloomberg New Energy Finance (BNEF) stipulate that the future of transportation is poised to look a lot different than the current oil-fueled model. Their analysis shows oil consumption peaking in 2004, and since then, it has remained flat for about a decade due to inventories surging through the fracking boom, increased vehicle fuel efficiency mandated by federal regulation, and the dawn of a new, clean form of transport – the electric vehicle.
All of these factors have coalesced to make oil a far less valuable commodity. In the U.S. alone, dramatic improvements in miles per gallon has cut oil demand to the point that automakers were averaging 24.5 MPG in 2001, and by 2014, that number was 31.6 – a 29% improvement in just thirteen years.
In addition to more efficient cars, automakers are steadily electrifying their fleets. Global sales of plug-ins reached 288,500 units last year, according to BNEF research. While that is less than 1% of total sales, it’s more than five times the number in 2011. The surge is due to the continued falling costs of electric batteries. BNEF estimates that the price of lithium-ion batteries that power most electric cars has fallen 60% from 2010, and will keep declining at the same pace.
There is also dwindling interest in continued investment in biofuels – gasoline substitutes made from corn and sugar in the form of ethanol. Currently, biofuels account for 10% of the U.S. fuel supply, and efforts to find an alternative from crops that cannot be eaten have stalled. Plus, lower oil costs make it economically unfeasible to produce fuels in such a manner.