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How Electric Cars Will Affect Oil Company Investors

“Between global warming, Elon Musk, and a worldwide crackdown on carbon, the future looks treacherous for Big Oil,” argues CNN Business writer Matt Egan, calling the rise of electric vehicles “an existential threat to the oil industry.”

“Passenger vehicles are the No. 1 source of demand for oil — and tomorrow’s transportation system may no longer rely on the gas station.”
Reliance on oil will probably peak between 2030 and 2035 if countries adhere to their recent low-carbon pledges, Barclays said [in a new report published this week]. However, the peak could arrive as soon as 2025 — just six years from now — if the world increases its focus on slashing carbon emissions. Electric vehicle sales have surged faster than anticipated, but they still represent a small portion of overall car sales. That means EVs are hurting oil demand, but they have yet to put a dent in it….

Research firm DNV GL estimates that peak oil will become a reality during the 2020s and demand will flat-line through the entire decade. “By 2030, oil shareholders will feel the impact,” said Sverre Alvik, lead author of the firm’s energy transition outlook report. Electric vehicles are likely to cause light vehicle oil demand to plunge by nearly 50% by 2040, Alvik said. Jens Peers, an executive at Mirova, an ESG affiliate of Natixis, advised owners of oil stocks to get out while they can. “We do not find them financially attractive today,” Peers said, noting “prohibitively high” regulatory and technological risks….

The deep uncertainty surrounding the future of oil demand that long-term investors should use caution in this space by carefully monitoring trends and steering clear of companies that are in denial about the future.

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