Spike in electric car sales seen changing global crude oil business

By 2025, there would be 4.5million units of electric cars on the road indicating that the world may shed over 2million barrels per day global crude oil according to forecasts by the UK-based McKinsey and Paris-based International Energy Association but the implications seem lost on Africa’s biggest oil producer.

 

The world petrol demand is believed to peak by 2030 largely due to the impact of electric cars and more efficient engines. Wood Mackenzie said it expects the take-up of electric vehicles to cut gasoline demand significantly as the world mainstream battery-powered cars.

 

European countries are passing regulations that compel car manufacturers to produce models that run further at the same amount of petrol in line with projections to ban internal combustion engine vehicles in two decades.

 

“The world around us is changing and the danger is that those of us in this part of the world who play ostrich, could be in a dangerous situation as time will pass quickly and others would move on,” warns Victor Eromosele in a keynote address at the 18th edition of the Annual Petroleum Policy Roundtable, organised by Centre for Petroleum Information (CPI) held at Eko Hotels, Lagos on July 20.

 

Tony Ogbuigwe, managing director, PEJAD Nigeria presenting on the theme: electric age and impact on refining said exploits been achieved in electric car manufacturing including reduction in charging time, investments in charging stations and more efficient engines that cover more distance on a single charge should make Nigeria who depend on crude oil to fund its budget jittery.

 

“Now electric car makers can come to set up a recharging point for you in your house, Switzerland is constructing metal strips, a technology that helps you charge the car while you are driving on some roads and ongoing research is helping to create lighter battery.

 

“To recharge electric cars, takes between 30mins- 1hour, they are developing more efficient system that will enable you recharge in less than 5 minutes,” Ogbuigwe said

 

The cost of electric vehicles, formerly a deterrent is falling. According to Bloomberg New Energy Finance, the industry average price of a lithium-ion battery pack was $208 a kilowatt hour in 2017 from about $800 in 2011, and batteries constitute about 42 percent of the total cost of an electric vehicle. It is projected to fall by 62 percent by 2030 as technological advances and ramped-up production push costs ever lower.

 

Western countries are granting rebates to encourage patronage. In US, the government knocks off 7.5 percent of cost of the first 20,000 units sold in the country. Recently, the concession has been withdrawn as Tesla sales have hit 20,000 units in the US.

 

But there is no shortage of enthusiasm. The order for Tesla Model 3 was completed before the company went to the market with a single unit.

 

Ogbuigwe said this will lead oil demand to further slow and refineries will cut back on petrol refining but will look to diesel and petrochemicals as new growth frontiers.

 

Nigeria’s three decrepit refineries on their best days run at 10 percent capacity and the country is not making any investment in building new ones but continues to sustain a profligate subsidy on petrol because governments with little to show for in concrete achievements are afraid to stoke up popular revolt by removing petrol subsidies.

 

Meanwhile the oil and gas market is evolving with dire implications for the country. US, formally a net importer of oil, who takes up 6million bpd from Nigeria, is angling to be the World’s biggest oil producer within a decade largely from shale oil.

 

India and China who currently buy the bulk of Nigeria’s oil are ramping production of electric cars and are heading a global move to form an oil buyer’s cartel that will cut back on OPEC’s influence on oil prices.

 

In China alone, there are 487 electric car makers. According to JPMorgan Chase & Co.’s 2025 EV Outlook report, robust global growth through 2025 would see China accounting for 12 per cent of the total EVs produced, from last year’s 2.3 per cent market share.

 

Meanwhile in India, over 2,000 units were sold year and heightened interest from many automakers Hyundai Motors Co., Maruti Suzuki India Ltd., Tata Motors Ltd., Mahindra & Mahindra Ltd., Ashok Leyland Ltd. and BYD Co to open plants in the country could sales hit the roof from government tenders bulk orders from fleet operators.

 

“We need to wake up to the fact that the world will not be needing our oil anymore,” warns Chambers Oyinbo, chairman CPI board of governors, “What is the future of petroleum in the world, especially in Nigeria? Why are more funds being invested in exploring and producing oil and gas when the industrialised countries are increasingly encouraging use of alternative fuels?”