Wow. So, just as talk of $4 a gallon gasoline for this summer began to heat up, the oil price crashes and prognosticators everywhere swivel faster than a weathervane in a Kansas tornado. One thing that impressed some reporters but probably had only a minimal impact on Thursday’s price move was the front page Wall Street Journal story which reported that the IEA’s Fatih Birol said, “We do not think gasoline consumption will come back to 2019 levels again.” And Volkswagen’s CEO Herbert Diess is quoted saying “E-mobility has won the race.”
Class, your assignment is to compare and contrast that with the Wall Street Journal’s March 8 story, “Electric Vehicles are the Future—if dealers can figure out the sale” It not only describes poor EV sales in the U.S., but dealer skepticism about a long-touted, repeatedly failed product. Seen a Solectria Force lately? Or a GM EV1?
So, what’s behind the many gushing stories about the coming dominance of the battery electric vehicle (BEV)? Well, sales are booming, as the figure below shows, a rate of growth that should make oil companies tremble and lithium miners smile. On top of that, the CEO of Exxon has said, “We think going forward that because of the emphasis on energy efficiency, ongoing improvements in vehicle miles standards and hybrid (cars), that motor vehicle gasoline demand is down, is headed down, and is going to continue to head down.” Voice of authority, certainly.
Global Sales of BEFs (thousands)
Long time readers of my work know that your humble narrator will now drop the other shoe. The quote above was from former Exxon CEO Rex Tillerson (whatever happened to him?) in 2009. And as the figure below shows, gasoline demand in the U.S. had in fact been falling, although the primary factor—not mentioned by Tillerson—would surely be the then-elevated gasoline prices, which had been $3 and more for several years. Prices came down as some of us predicted, and demand resumed growing—up to the advent of the current pandemic.
U.S. Gasoline Demand (tb/d) and the False Peak
Still, the press is full of stories about plummeting lithium-ion battery prices, new electric vehicle models, BEV sales holding up better than conventional cars in the pandemic, and market dominance in Norway and China. Except (more shoes), electric vehicle prices remain far above conventional vehicles’, BEV sales are probably holding up because they appeal to higher-income buyers who are less affected by the pandemic, and sales are booming only where large amounts of government support are available. All of which suggests that electric vehicles are not a mass market item as of yet.
Which brings us to our Ed Sullivan, ‘really big shoe’ moment (look it up). The figure below shows BEV sales in the context of total automobile sales and even including the somewhat questionable Chinese sales data, their sales are clearly swamped by conventional vehicles.
BEV and Total Global Auto Sales
It is possible that governments, as part of post-pandemic stimulus packages, will maintain or increase support for BEV purchases, but it is also possible that the now-massive government debt levels will see them turn instead to cheaper ways of reducing greenhouse gas emissions, of which there are many. At the very least, it seems likely that those pouring money into company equities simply because of prospective BEV sales at a future date will look back at this as a time of irrational exuberance.
I am a Distinguished Fellow at the Energy Policy Research Foundation and President of Strategic Energy and Economic Research. I spent nearly 30 years at MIT as a student