In a new analysis, titled “Wells, Wires & Wheels” by the world’s 8th largest bank by total assets, BNP Paribas, the oil industry is facing a huge threat from renewable electricity, which is driving the growth of electric vehicles over traditional gasoline cars. In the report, the bank’s economists warn that within just a few years, EVs will be superior to gasoline cars because prices for solar and wind power and batteries will continue to drop in the future. According to their predictions, the only way gasoline cars will be able to remain competitive in the 2020s if the price of oil drops from the current price of US$50 to $11-12 per barrel. Not to mention, there are additional economic savings to be reaped from the reduction in air pollution if we eliminated oil burning which will lessen the pressure on public health systems, and the ecological benefits from being able to avoid huge oil spills and a degrading climate situation.
Other independent analyses by other institutional banks have also come to similar conclusions. Bloomberg’s New Energy Finance (NEF) and risk management firm DNV GL have said that within 2022 and 2024, the total lifecycle cost of owning an electric car will be cheaper than conventional cars running on fuel.
However, the BNP report also cautions against over-optimism. “There is a catch, and it is a big one. Oil has a massive incumbency advantage,” writes Mark Lewis, the global head of sustainability research at the bank. Oil is currently still reaping the rewards of an in-built existing system that is perfectly structured for their industry. In other words, from production to delivery, the current system gives the oil industry a huge short-term advantage over the less well-established infrastructure that supports EVs. The oil industry is also able to use its current massive income to buy more political power through investing in lobbying to wield pressure over pro-oil government policies and block any plans to redirect oil subsidies to other cleaner sectors.
Despite this, governments will inevitably start to make bigger investments in EVs and the underlying clean energy sector, because the economic, public health and climate advantages can no longer be ignored, the report says. Over time, the analysis finds that within one decade, a significant fraction of oil produced today can only remain market competitive if they sell it below the cost of production, especially as the penetration rate of EVs continues to rise.
BNP’s conclusions are significant, especially if we are to be able to instigate a global dramatic transformation in our current system that involves the participation of all individuals. Rather than being motivated by altruistic or moral reasons to adopt more eco-friendly switches in our daily routines and consumer decisions, turns out, most of us are persuaded by what is cost-efficient. According to a 2018 study conducted by University of Chicago researchers in Japan, people only made the switch to more energy-saving alternatives and renewable energy when it was friendlier to their wallets. While renewables have yet to become the cheaper option in many areas, it is indeed catching up with solar power already costing less than the national grid in numerous Chinese cities.
While these positive conclusions and predictions suggest that we are headed in the right direction, we must also remain vigilant as we continue to have a long way to go to combat the climate crisis. Of course, one of the crucial steps we must take is to eradicate the oil industry that is at the crux of our global warming emergency, and if we manage to do so, we might not be too late to save ourselves and future generations from climate catastrophe.
