• Friday, March 29, 2024
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Why Tesla’s CEO financial quest means sleepless night for fossil fuel companies

Elon Musk set to step down as Twitter CEO

The financial rise of Elon Musk, CEO of Electric Vehicle maker, Tesla as the world’s richest person thanks to a net worth of over $185billion is expected to be a major headache for fossil fuel companies, who seems overwhelmed by growing uncertainties.

On the back of consistent profit and inclusion in S&P 500, Tesla’s share price has rallied by more than 743 percent since the end of 2019, as the EV maker ramped up production and deliveries, started vehicle production at its Shanghai factory in China, and launched the construction of its factory in Berlin, Germany, and in Austin, Texas.

For most energy experts, Tesla’s extraordinary stock rally is the market’s way of signalling a much awaited shift already taking place in the global energy space and the upcoming winners and losers.

The International Energy Agency (IEA) in its 2020 World Energy Outlook, published in October acknowledged that the petroleum industry is facing a historic change.

Read Also: Nigeria needs oil prices at $200 per barrel for another boom

“The era of global oil demand growth will come to an end in the next decade,” said Fatih Birol, the executive director of the IEA.

Even Ben van Beurden, chief executive of AngloDutch oil major Royal

Dutch Shell RDSA.L, said the company did not expect oil demand to recover in the medium term, saying the industry was living in a “crisis of uncertainty”.

Bernard Looney, chief executive of BP BP.L, was later quoted in the Financial Times as saying he would not “write off” the possibility the world had reached peak oil.

With fuel for road transport accounting for about half of all oil demand, the possibility of a faster-than expected switch to EVS in the wake of the pandemic is one of the main reasons some experts are positive about the rise of Tesla’s shares, a development with huge implications for global oil demand.

“We think this will lead to a tipping point, accelerating the switch to electric vehicles in many more countries around 202324,” Per Magnus Nysveen, senior partner at Rystad Energy, a consultancy in Oslo, told Reuters.

With various European countries planning to ultimately ban sales of new petrol and diesel cars, some see increasingly ambitious EV commitments by automakers as another sign of the beginning of the end of the fossil fuel era.

“It’s inconceivable that all that demand for oil comes back in one go, so the real question is how much of that is lost permanently,” said Mark Lewis, head of sustainability research at BNP Paribas Asset Management.

Also, another biggest problem for oil companies and other Organisation of Petroleum Exporting Countries (OPEC) is the confluence between electric vehicle sales and the next American President Joe Biden’s green agenda.

President- elect Joe Biden is aiming to create 1 million new jobs in the domestic auto industry, expand electric vehicle charging infrastructure across the U.S., and ramp up solar energy and other renewables here as part of his clean energy plan, a development that looks easier as the Democrats sealed their majority in the chamber last week after the Georgia runoffs.

The Coronavirus pandemic and an uncertain, volatile oil market have forced the world’s biggest oil companies to write down their asset value by $145billion, the most in a decade, raising questions about long-term recovery of prices and setting off existential crises for local operators.

The above development is a tough call to swallow for oil producers like Nigeria, which has undergone two recessions in the past 5 years, largely as a result of a collapse in oil prices which is responsible for up to 60 percent of the country’s budget and 90 percent of export earnings.