Are Electric Vehicles Killing Big Oil?
I’ll admit oil’s recovery had a bit of a setback this month.
Together, Harvey and Irma hit the industry hard, cutting off nearly 30% of U.S. refining capacity one week and wreaking havoc on the nation’s demand the next.
The Department of Energy reported that roughly half of Floridians were out as the storm made its way through Georgia and Alabama.
Of course, it also doesn’t help when U.S. crude production is on the rise and projected to reach a new record high in 2018 (whether that happens, dear reader, remains to be seen).
Remember, any strong rally for oil prices will spur even more drilling activity and put us right back where we started...
Unless, of course, electric vehicles kill the industry first.
Let’s take a step back.
The oil industry has been on a long road of recovery since early 2016.
Of course, a “recovery” for us would mean balance.
More importantly, OPEC may very well implode long before our tight oil production does. The oil cartel is tearing itself apart from the inside and was in dire straits long before the oil rout began in 2014.
This month, it announced that the production cut had finally made some progress, with the entire group’s total output falling by 79,000 barrels per day between July and August.
That’s barely a drop in the bucket considering the group’s usual output is over 3 million barrels per day.
But hey, progress is progress... isn’t it?
What some people ignore is that this isn’t the first time there’s a changing of the guard at the top of global crude production.
More than a century ago, Pennsylvania was the world’s largest oil producer.
At another point, Mexico (yes, Mexico!) was on top.
Over the last few decades, Saudi Arabia has reigned supreme.
Now, the U.S. is a contender for that title within the next decade.
It’s just changing the power structure, as happens in every market that survives long enough.
Yet there are still others who insist the industry will never balance out... because it’ll be dead on arrival once electric vehicles take hold.
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Here's the catch...
This transition could take far longer than most people believe.
Even if, as some of the more optimistic estimates claim, EVs make up more than half of the new cars on the road by 2040, that’s only taking into account new cars.
In fact, that reality is becoming more and more likely, as China has just joined France and Britain in planning to ban the production and sale of gas and diesel cars after 2040.
But here’s the thing...
People aren’t just going to give up their old, reliable gas-fueled cars.
There will still be decades' worth of older cars on the road to contend with, which won’t just disappear overnight.
Plus, there are some things lithium batteries simply can’t replace.
Petroleum chemicals are an essential part of practically everything you use every day, including your computer, your clothes, your shampoo, various parts of your house... everything.
Even if we were to go 100% electric in our cars right now, oil would still be essential to the way our world functions today.
The Scenic Route
But that’s not exciting. That’s not what gets the social media clicks or gets your heart racing for the next round of profits.
So I’ll give those oil bears one thing: they know how to hype.
Sure, oil’s not running out anytime soon...
But neither is the EV crowd wrong about what a huge impact the technology is having on the face of energy today.
And as bullish as I am on oil, even I can’t deny the changes taking place.
I’m sure as hell not missing out on an opportunity to profit from them.
In fact, my readers took full advantage of the lithium revolution early on and ended up pocketing the easiest 200% gains they’ve ever seen.
And now, they’re doing the exact same with another critical energy metal: cobalt.
The producer we’re looking at today is still developing its projects right next door to the legendary Gigafactory, but the investment herd has yet to catch wind of it.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
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