Will electric cars displace oil?

Predictions about peak oil, aggressive energy transition programmes among countries and international oil companies are widespread and electricity offers an alternative energy source to power vehicles with the possibility of displacing oil.

Global sales of electric cars accelerated fast in 2020, rising by 43 percent to more than 3 million, despite overall car sales slumping by a fifth during the coronavirus pandemic. Tesla was the brand selling the most electric cars, delivering almost 500,000, followed by Volkswagen.

However, light bulbs were also thought to displace oil when they provided an alternative source of lighting in the 19th Century. But other uses were soon found for oil with the invention of cars.

Some of the earliest civilisations relied on oil. Already in 3, 000 BC oil that had bubbled to the surface was used by the ancient people of the Middle East.

The Babylonians, that is, modern-day Iraqis – used oil to waterproof their boats and as mortar in building construction. The Egyptians also used oil in the preparation of mummies to help preserve corpses. However, it would be a long time before the full potential of this mysterious black substance would be understood, or exploited.

In the mid – 1800s the modern oil industry began with the discovery of the world’s first commercially viable oil well in the USA. One product, kerosene, became popular as a cheap, clean fuel for lighting homes.

A few years later, America’s first commercial oil well was created at Titusville, Pennsylvania when a new technique was pioneered using a pipeline to line the boreholes to allow deeper drilling. The success of the well, plus a demand for kerosene, triggered an oil rush and began a major new industry.

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“Oil has suffered near death several times. It is natural of human systems to be born, peak and die. Many thought the invention of the light bulbs would displace oil but then came internal combustion engines and the aviation industry,” a petroleum engineer and energy consultant at the Centre for Petroleum, Energy Economics and Law at the University of Ibadan said in a phone interview.

In the race to a net-zero carbon future, clean electricity is emerging as the ultimate fuel of the future, with biofuels to fly planes, and hydrogen for energy storage.

The Hague-based Maarten Wetselaar, integrated gas and new energies director at Shell Global said at the Great Energy Debate 2020 that the fuel of the future is clean electricity.

“That is going to be the one that will dominate the energy systems for energy consumers. Alongside that there will be biofuels to fly planes, there will be hydrogen to store energy, but the energy that customers will use will be clean electricity. We need to phase out oil and gas but it will not happen tomorrow.”

Six years ago, the Paris Agreement sought to strengthen the global response to the threat of climate change by keeping temperature rise this century well below 2 degrees Celsius, and above pre-industry levels and pursue efforts to limit the temperature even further to 1.50 degrees Celsius. Renewable energy and electric cars provide quick paths to a low carbon emission future.

Nevertheless, “oil is difficult to displace and remains cheaper than renewables. Additionally, petroleum derivatives would continue to drive demand for oil. Rising demand for petrochemicals such as plastics, raisins and fertilizers will keep oil relevant for a long time,” Akinkpelu said.

Last year some executives resigned at Royal Dutch Shell in protest against what they described as the company’s slow adoption of renewables despite significant investments in greener fuels in preparation for a net-zero emission future.

According to a Financial Times report, the upsurge of resignations came just weeks before Shell was set to announce its strategy for the energy transition.

While some executives have pushed for a more aggressive shift from oil, top management was more inclined to stick closer to the company’s current path, according to four people familiar with the matter.

Ben van Beurden, chief executive officer of Shell has said investment into lower-carbon businesses such as biofuels and solar power “needs to accelerate”. However, he has also said that oil will continue to be a huge cash generator and the company will expand its gas division. “There is going to be a place for our upstream business for many decades to come,” he recently told a conference.