BNP Paribas is a banking giant that boasts more than $400 billion in assets under its management worldwide.
According to a summary of the BNP Paribas report published on BusinessGreen.Com, in a relatively short time, wind and solar will produce more energy for battery-powered EVs at a much cheaper price than oil will for petrol and diesel cars.BusinessGreen.Com’s summary of the report notes that “shifting economics mean it will soon make little financial sense to produce oil for petrol and diesel cars in the coming decades, when EVs powered by renewables offer a far cheaper, cleaner, and more efficient alternative.”
That is INCREDIBLE news, news we here at SolarChargedDriving.Com both welcome – in a HUGE way! – and news we have been hoping for, and predicting, for the 10 years that SolarChargedDriving.Com has been around!
According to BusinessGreen.Com, comparing the investment needed at today’s prices to produce oil and renewable energy over the next 25 years, the report found it would cost between 6.2 and seven times more to produce the same amount of energy for a petrol car from oil, than it would to generate renewable electricity from solar and wind for an EV.
“This is a tremor portending an earthquake for the oil and gas industry,” Mark Lewis, the French banking giant’s global head of sustainable research wrote in the report. “Forty per cent of global oil demand today is accounted for by uses that will not make any economic sense once wind and solar reach sufficient global scale and cost-competitive batteries accelerate the penetration rate of EVs.”
Currently, reports BusinessGreen.Com, around 36 per cent of global oil demand comes from petrol and diesel cars, on top of roughly five per cent for energy production. With a significant scale up of renewables in the next decade or so, wind and solar could readily replace that chunk of the oil business, the report argues.
“On the most dramatic reading, it is only a matter of time before the economics of renewables and EVs overwhelm oil and displace up to 40 per cent of its current demand,” the report adds. “For the oil majors, the challenge is on a scale that they have never faced before, and business-as-usual is simply not an option.”
“This is a tremor portending an earthquake for the oil and gas industry. Forty per cent of global oil demand today is accounted for by uses that will not make any economic sense once wind and solar reach sufficient global scale and cost-competitive batteries accelerate the penetration rate of EVs.”
According to BusinessGreen.Com, the report estimates that in order to compete with renewables-powered EVs in future, oil companies would need to be selling barrels of oil at just $9-10 to produce petrol, and $17-19 for diesel cars, just to break even. Today, a barrel of oil sells at roughly $55.
For a new oil-extraction project sanctioned today, that break-even point could be reached by 2035-2040, BusinessGreen.Com reports. That is roughly the same time by which governments such as the UK and France have pledged to phase out the sale of new fossil fuel cars completely.
Even if you add in the costs of power grid enhancements to balance the surge in intermittent renewables capacity and EV charging requirements “the economics of renewables still crush those of oil”, the BNP report concludes.
What is more, as BusinessGreen.Com reports, the analysis is based on today’s prices and does not take into account likely significant further cost reductions of wind and solar in the next 25 years. These reductions could tip the price of a barrel of oil for road transport needed to remain competitive into single figures.
Overall, Big Oil appears to be in BIG trouble in the not-too-distant future!
“In our view, this should be an extremely alarming prospect for the oil majors,” Lewis writes in the report. “Accordingly, we think the oil majors should be accelerating the deployment of capital into renewable-energy and energy-storage technologies and/or reducing re-investment risk via higher dividend payouts to shareholders.”