Will the global economy see peak oil demand by 2030 or 2040? Can Alberta survive permanent low oil prices?
Saturday was a momentous day for Alberta, even if most Albertans probably won’t acknowledge or accept just how important it is that China now says it is planning to ban internal combustion engine automobiles in the near future.
We don’t know exactly when the ban will start or how it will be implemented, but when the world’s largest auto market and a huge driver of anticipated demand growth for oil until 2040 says electric vehicles are the future and “polluting fuels” will be outlawed, Alberta should sit up and pay attention.
“Some countries have made a timeline for when to stop the production and sales of traditional fuel cars,”Xin Guobin, China’s vice minister of industry and information technology, said at an auto forum in Tianjin, as reported by Automotive China News.
“The ministry has also started relevant research and will make such a timeline with relevant departments. Those measures will certainly bring profound changes for our car industry’s development.”
They almost certainly will. But the announcement didn’t come out of the blue.
China has been planning for some time to start with quotas for electric vehicle sales.
Planned mandates require firms to sell electric or plug-in hybrid vehicles to generate “credits” equivalent to 8 per cent of total sales by 2018, 10 per cent by 2019 and 12 per cent by 2020.
The new rules were considered sufficiently draconian that in June automakers from the US, Europe, Japan and Korea sent a letter to the government asking that “At a minimum, the mandate needs to be delayed a year and include additional flexibilities.”
China’s government is also a member of the Electric Vehicle Initiative that launched the EV30@30 campaign in June in Beijing with a “collective aspirational goal” of a 30 per cent market share for EVss in the total of all passenger cars, light commercial vehicles, buses and trucks by 2030, according to the IEA.
France and the United Kingdom have already said they will ban gasoline-powered vehicles by 2040 and Norway is considering allowing only EV sales as early as 2025.
“Banning sales of diesel and gasoline vehicles by 2040 is a bit like banning sales of horses for road transportation by 2040: there won’t be any to ban,” Rethinkx founder Tony Seba told the Guardian.
Seba, also a lecturer with Stanford University, is the leading proponent of the one of the two EV adoption models that could disrupt global transportation markets. Called “mobility as a service” or “transportation as a service,” autos would no longer be owned by individuals. Instead, consumers would call up a self-driving EV from companies like Uber or Lyft – perhaps local taxi companies or even global automakers – to get to and from their destination.
The key, says Seba, is that a higher utilization of EVs combined with low maintenance costs would reduce the cost of a mile travelled by a factor of between four and 10 times. Why would consumers own a car when they can take the kids to soccer practice or commute to work for as little as 10 per cent of what it used to cost? Seba asks.
The driver of MaaS adoption would be radically lower costs. But the driver for the Replacement Model – driving an EV instead of an internal combustion engine car or truck – would be an increase in value created by significantly more powerful batteries currently being developed in laboratories around the world.
Leading electro-chemist research Prof Yi Cui of Stanford told me in an interview that he expects the dominant Lithium-ion batteries to decrease in cost by 50 per cent and increase in energy density by 50 per cent over the next decade.
By then, other chemistries like Li-metal or Li-sulfur will be emerging from the labs and ready for commercialization. Those batteries will have energy density from 4 times to 10 times that of Li-ion.
Imagine your Tesla Model S getting 10,00 kilometres from a single charge. Or using that higher energy density to electrify big trucks such as long-haul freight, buses, or garbage trucks.
How does China play into these scenarios?
The same way it did for, say, solar panels. By manufacturing panels in huge quantities, China drove down the cost of solar energy technology so low that it is now becoming competitive with other forms of power generation.
China has already signalled it wants to dominate the global EV manufacturing segment.
The decision to ban gasoline-powered cars from the domestic market is part of that strategy. And China has the capital, manufacturing capacity, technology know how, and policy focus to achieve it.
In the blink of an eye, the forecast by the International Energy Agency that oil demand will increase from its current level around 96 million b/d to 113 million b/d – most of that rise driven by economic expansion in China and India – now seems overly optimistic.
Will China’s aggressive push into EVs means we reach peak oil demand by 2040, instead? Or maybe even by 2030?
Those scenarios are no longer implausible.
And the smug oil executives in Calgary, some of whom have laughed off the challenge presented by electrification, need to re-examine their business plans and political strategies.
Their world isn’t about to change tomorrow, but China is likely to change it much quicker than many – myself included – expected.