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“End Of Oil” Narratives Are Misleading

“End Of Oil” Narratives Are Misleading

Oil

The world isn’t reinventing the wheel. But we are changing how it turns, who it carries and where it’s going.

Over the next few decades we’ll be plugging in more cars, hailing and sharing them, and reminiscing about the good ol’ days of the steering wheel.

To be sure, these looming mobility changes are all exciting and impactful. But none of these nascent trends extrapolate easily into a narrative about “the end of oil,” a disruptive displacement of the fuel everyone loves to hate.

Contrary to armchair calculus, more electric vehicle (EV) sales do not equate to the world using less oil anytime soon.

In fact, whichever way you cut the spreadsheets, the numbers are pointing in the opposite direction. By 2030, less than 15 years from now, I expect around 400 million more internal combustion engines will accumulate into the global fleet of passenger cars – even after assuming that EV market penetration is accelerated with the heavy-handed help of governments around the world.

Here is an indication of the scale of vehicle accumulation: So far this year, to the end of September, over 70 million vehicles with internal combustion engines have been sold worldwide. Every new vehicle that’s sold lingers in the fleet.

Simplistic assumptions and analogies abound. A petroleum-powered vehicle is not like a cheap DVD or videocassette that gets pitched out the minute you buy a Netflix subscription. A car already on the road is an expensive asset –most often financed with debt – that’s put to work for as long as possible by a string of owners. What’s under-appreciated is that most oil-burning vehicles will resist going to the scrap yard, due to their stubborn and improving reliability (see my column Old Pistons Die Hard from October 16th.)

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