* Pandemic could accelerate switch to EVs
* Constellation data offers insight into automakers' plans
* Some analysts suspect that peak oil demand has already
passed
* Government choices over "green recoveries" will be key
By Matthew Green and Simon Jessop
LONDON, May 19 (Reuters) - Oil companies may be facing
uncertainty as the coronavirus pandemic triggers a collapse in
demand for their products, but auto makers are betting the
crisis will help accelerate an electric future.
With economies reeling from lockdowns to curb the virus, the
sharpest plunge in oil prices in two decades has slashed the
cost of filling up a tank of gas, eroding some of the incentive
to make the switch to cleaner fuels.
Looking ahead, cuts in capital spending forced upon energy
companies as their revenues crumble could tighten supply enough
to cause a spike in oil prices, making electric vehicles more
attractive just as automakers ramp up production, analysts say.
"We think this will lead to a tipping point, accelerating
the switch to electric vehicles in many more countries around
2023-24," Per Magnus Nysveen, senior partner at Rystad Energy, a
consultancy in Oslo, told Reuters.
"We will start to see that this starts to dig into global
oil demand in a very significant way," he said.
According to a Reuters analysis of 27 automakers compiled in
partnership with Constellation Research & Technology, most
companies apart from Elon Musk's Tesla Inc and China's
BYD Co Ltd are still in the early stages of
transitioning to EVs, which make up a fraction of global sales.
(For an interactive graphic on business model transformation
and decarbonization within the auto manufacturing sector, see: https://graphics.reuters.com/DATA-ESG/AUTOS/ygdpzylllvw/index.html)
With mid-sized to large petroleum-fuelled SUVs and trucks
driving much of the recent growth in the auto sector, many
companies are banking on these high-emitting gas-guzzlers to
drive their near-term performance.
Nevertheless, with China's BAIC Motor Corp and
German rivals Volkswagen Group and Daimler AG
pursuing some of the industry's most ambitious
decarbonisation targets, investors are increasingly using a
company's EV prospects as a proxy for future success.
"All the growth in transportation is being eaten by
electricity," said Harry Benham, chairman of Ember-Climate, a
British energy transition think-tank. "Oil and gas companies
have got no ability to defeat electricity as a transport fuel."
PEAK OIL DEMAND?
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 forecasts for a peak have been brought forward.
Global oil demand hit a record of just over 100 million
barrels per day (bpd) in 2019. Rystad now sees demand topping
out at 106.5 million-107 million bpd in 2027-2028. The
consultancy had previously forecast a marginally higher peak in
2030.
Although the oil industry has defied numerous attempts to
call "peak oil" in the past, the fact that the International
Energy Agency projects that demand will plunge by a record 8.6
million bpd this year has reignited the debate.
Though as yet a minority view, some believe the pandemic is
reshaping patterns of work, aviation and commuting so profoundly
that oil demand might never return to 2019 levels - a potential
boost to hopes of avoiding the worst impacts of climate change.
"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.
Underscoring the changing economics of transport, Reuters
revealed last week that Tesla plans to introduce a new low-cost,
long-life battery in its Model 3 sedan in China that it expects
to bring the cost of EVs in line with gasoline models.
Despite such potential breakthroughs, the Constellation data
shows that automakers still have a long way to go to align
themselves with climate goals enshrined in the 2015 Paris
Agreement, with Ford Motor Co and Fiat Chrysler
Automobiles among the biggest laggards.
Volkswagen has announced some of the most aggressive
long-term plans to decarbonise its fleet, but the company still
has to prove it can build EVs at scale, and has led the field in
ramping up sales of mid- and large SUVs, the data shows.
Although the public decarbonisation targets of Japan's
Toyota Motor Corp are only a little bolder than the
industry average, the company's proven capacity to build hybrids
may bode well for its EV ambitions, the data
suggests.
Japan's Subaru Corp, which produces only a small
number of hybrid vehicles, might have to rely on its partnership
with Toyota if it wants to prosper as demand for EVs picks up,
Constellation analysts said.
'CRISIS OF UNCERTAINTY'
Although the oil industry hopes to offset demand lost to EVs
with a growing appetite for crude to make petrochemicals and
plastics, companies facing growing pressure from investors over
climate change are increasingly open about the risks.
In April, Ben van Beurden, chief executive of Anglo-Dutch
oil major Royal Dutch Shell, 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, was later
quoted in the Financial Times as saying he would not "write off"
the possibility the world had reached peak oil.
Much will depend on whether economies stage a V-shaped
recovery, as some forecasters predict, and how far governments
adopt new EV targets as part of "green stimulus" packages to
spur a faster shift to a low-carbon future.
With many European politicians calling for green recoveries,
the French government signalled on Monday that the country wants
to boost sales of low-emission cars. China has extended backing
for EVs as part of its recovery package, and U.S. Democrats are
exploring ways to boost demand for clean vehicles.
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.
"One of the primary factors holding back the transition has
been resistance by the fossil fuel incumbents," said Kingsmill
Bond, senior strategist at financial think-tank Carbon Tracker.
"Now those incumbents are significantly weakened."
(Reporting by Matthew Green and Simon Jessop in London
Additional reporting by Christine Chan in New York
Editing by David Evans)
