Is the hybrid car industry a threat to the oil industry?

With the gaining popularity of hybrid cars and the rise of Tesla, many feel that the oil industry is forever doomed. With so many options that allow us to use less gas for transportation, how can the oil industry possibly survive?

Although there are more hybrid cars on the road than ever before, the amount of gasoline-powered vehicles still outnumber them by far. No matter what changes take place, it will take years to have a major impact on an industry as large and valuable as the oil industry.

The true hybrids, that charge their battery with the friction from braking, don’t pose as big of a threat to the oil industry as other alternative fuel vehicles. Although hybrids do increase the efficiency of transportation, hybrid vehicles still run on gasoline.

In an effort to meet the increasing demand for high-efficiency vehicles, we can expect to see auto manufacturers producing more of these traditional hybrid vehicles. However, the area that the oil industry has a sharp eye on is the innovation happening with electric vehicles.

Electric vehicles have the potential to seriously threaten the oil industry and to cause major changes in the auto industry, which will likely see a number of mergers and acquisitions whenever certain brands struggle to keep up.

Early Threats

Just a few years ago, oil companies didn’t feel threatened at all by hybrid vehicles and felt that electric vehicles posed very little threat. At least, not anytime soon. According to their estimates in 2012, few, if any, drivers today will see electric cars outnumber diesel vehicles in their lifetime. In fact, both Exxon and BP published reports estimating that electric cars would only account for four to five percent of vehicles on the road over the next 20 to 30 years.

However, over that same period of time, the US government is targeting a 60 percent market share. So who do we believe?

Despite the obvious conflicts of interest, those estimates aren’t even remotely close to each other. Also, you have to consider that both the government and the oil industry’s estimates at that time were considering that electric vehicles would have to be plugged in and would resemble the cars on the market at that time.

In its Energy Outlook for 2030, released in 2012, BP estimated that electric vehicles and plug-in hybrids, will only account for four percent of the global fleet of 1.6 billion commercial and passenger vehicles in 2030. According to BP Chief Executive Bob Dudley, “Oil will remain the dominant transport fuel and we expect 87 percent of transport fuel in 2030 will still be petroleum based.”

Exxon Mobil claimed that the continued high cost of electric vehicles compared to petroleum cars will slow the adoption of electric vehicles even through the 2030s. In their 2040 Energy Outlook, released in 2012, they stated that electric vehicles, plug-in hybrids, and vehicles that run on natural gas will only account for five percent of the global fleet by 2040.

Despite their pessimistic outlook on the adoption of hybrid vehicles, they did admit that they expected to see a decrease in the world’s addiction to oil.

The Big Threat

Only three years have passed since those predictions were published by Exxon and BP in 2012 and a lot has changed. One of the more significant events has been the decline of oil prices throughout 2014 and 2015, but that’s not the big threat that the oil industry is concerned about.

In July of 2015, Alberta Oil magazine published an article about what the oil industry sees as their biggest threat — the Tesla Model-S. What started as an overly-ambitious goal of making a battery-powered car that people actually wanted to drive has turned into a very realistic reality with the Tesla Model-S.

The first Tesla model was impressive, but its high cost presented a very big barrier to entry for most people. However, that’s all changed now with their more affordable luxury sedan. According to Alberta Oil, the Tesla Model-S is “one of the most beautiful and interesting automobiles to ever get made, but possibly also one of the most dangerous.” I think it’s safe to say that most people would agree with Alberta Oil when they say that the Tesla Model-S “managed to do something that no other electric vehicle has ever achieved: become an object of desire.”

Now it looks like the oil industry will have a new competitor, as the battery industry is predicted to reach $100 billion by 2030.

That’s not to say that the oil industry is going away anytime soon, because that’s certainly not the case. We have to consider that oil is required to manufacture these vehicles and is still one of the best energy sources that we have. However, they are facing a significant threat to lose market share in an industry that they’ve dominated for so long — the automobile industry.

Kyle Stout is a freelance writer based out of Tulsa, OK. This article was prepared on behalf of Pemex English Library.

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