Shell, terrified of EVs, expects ‘low forever’ Gasoline Prices; it is too Optimistic

By Juan Cole | (Informed Comment) | – –

The Telegraph reports that Royal Dutch Shell, the massive oil company, has abruptly decided that petroleum prices are likely to remain low “forever,” given the rise of the electric vehicle.

France and Britain have both just vowed that they will have no gasoline vehicles by 2040, and India and China both have huge electric vehicle ambitions.

Most petroleum is used for transportation, and it is that sector that gives it its high value. It is also used for fertilizer production and plastics, but those sectors are very low-paying compared to transportation. Besides, if people have any sense they will soon start banning plastic, too.

Without internal combustion engine vehicles on the road, petroleum will soon become all but worthless.

Shell appears still to hope against hope that there will be plenty of demand in poorer countries in the 2030s and 2040s, apparently expecting that they will not be able to afford the new electric cars.

Shell would be wrong to bet on this scenario. China is already launching a $22,000 electric car that can be quickly recharged and goes 200 miles on a charge. If they really can pull this feat off by 2022, then imagine what they can do by 2040!

Countries like Norway have demonstrated that tax policy can be successfully implemented to encourage electric car purchases rather than gasoline cars. Poor countries have every reason to want to reduce petroleum import bills in this way, and to go to solar and wind for electricity production.

Not only will the future of transportation be electric, generated by solar and wind, but ride sharing and other innovations may well cut down on the sheer number of vehicles, also reducing petroleum demand.

Shell is not the only hydrocarbon giant from whose eyes the scales are falling.

The state of Oklahoma is putting in a ginormous $4.5 bn., 2 gigawatt wind farm. I love Oklahoma but its right wing politicians have been among the more annoying in the world in their obsequiousness to oil and gas interests. Trump’s EPA-killing secretary of the EPA , Scott Pruitt, is a case in point. But nobody is going to pay 12 cents a kilowatt hour for electricity if it can be had for four cents. This new wind farm will save consumers $7 billion over 25 years even though state and Federal subsidies will have been phased out by the time it comes on line in 2020. An even bigger such facility is being built in Wyoming.

Shell is putting $1 billion into green energy itself and is said to be wary of becoming over-extended in an unfamiliar market. I’d say, get familiar, quick.

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12 Responses

  1. Royal Dutch Shell is probably correct that Peak Oil and its aftermath involve declining retail prices for oil. The scenario in the Waterworld film, with desperadoes fighting over the remaining barrels of oil, probably won’t come to pass.

    The world is likely to have lots of gray markets in batteries of uncertain quality and origin. As electric transport spreads from wealthy regulated neoliberal territory to poorer areas, this is likely more true. Cheap EVs will, likely, be powered with dodgy recycled end-of-life batteries, or crash-damaged batteries.

    The political resistance of electric grid companies to rolling out a smart grid — a load-shiftiing distributed distribution network — is probably a bigger problem for the future than shenanigans at Shell or Aramco.

    • Guess what organization is heavily pushing non-carbon energy research . . .

      But you are correct, fewer USA wars = lower carbon energy usage = HUGE cost savings to the USA taxpayer.

    • The savings on total US consumption of 7 billion barrels per year would be 1.4%. The military aren’t the only pigs in this country.

  2. I somehow doubt Shell are actually terrified. They are a highly competent outfit whose senior people are interchangeable with similar sized corporations anywhere. They will adapt to changes in demand and are not going to be filing for bankruptcy. They and their ilk will still be running things whatever happens. It is also worth bearing in mind that imagining the world to be as it is now but with vehicles running on EV yields a very narrow view. There are many things happening that are likely to relegate that image to much lower priority. Waters across the planet are rising, no continent is unaffected, the ocean level at Marseille for instance has risen 10 centimetres in 30 years, the littoral parameters of the world’s land surfaces are changing in a way that will directly effect some 200 million people and their lives and homes. Simply changing the use of fossil fuel for transportation cannot arrest that in any meaningful way. The melting ice flows of the Arctic are attracting algae which, being dark, absorbs significantly more heat than reflective white surfaces and is increasing the rate at which the residual ice is melting. Another unanticipated consequence is that the land in much of Scandinavia is actually rising faster than the water because the vast ice flows, some well over a kilometre deep, compressed the land but as they melt and their pressure is released the land rises like a cake in the oven. How many more dots do you imagine there may be that mankind’s hubris and lack of respect for Nature have not yet to joined up? The US spends trillions on ‘security’ but that brings to my mind the Japanese invasion of Malaya when no one imagined they would come down from the north so all the guns and defences were on the island of Blakang Mati facing south from Singapore and the whole peninsular was left wide open.

    • You are too confident in corporations. Lots of them have failed because they couldn’t adapt to changing conditions. I guarantee you everyone in the oil business looks at Tesla 3 and Bolt and the Chinese counterparts and loses it.

      • Or someday, all wind turbines and solar panels will have the Raymond Loewy, yellow-over-red pecten logo of Shell?

        • No

          Shell does not have enough resources to buy even a small portion of the solar and wind manufacturing businesses around the world.

          Not only that, but most countries will not allow shell to buy the local companies. In particular, China will “just say no” to any attempt by shell to buy Chinese companies. China does NOT want any foreign control over its solar industry as they consider it a national security priority. China wants to have the entire country using “free” solar and wind energy as soon as possible so China has no financial obligation to any other country.

  3. Your profitability “sources” are wrong. Plastics and petrochemicals are generally MUCH more profitable than are sales of gasoline, diesel and kerosene ($/gallon, $/lb). It’s just that the volume of material sold for fuel is so much greater than the volume used for chemicals. Plus, not all petroleum contents are easily made into protitable chemicals (e.g. Hexane, octane, Dodecane). And the source of the hydrogen used to make ammonia is usually methane (nat gas) or water and pet coke. In fact, petroleum refining actually uses a lot of hydrogen to make gasoline (“hydrocracking”), especially for crap grade crude like Tar Sands Sludge… but, nice article, other than those trivial points…

    • Plastics etc. are not as profitable as gasoline however you dress it up. Dump oil stocks from your portfolio because they are going down.

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