I have a question. If we move completely away from fossil fuels for transportation, what will happen to the cost of all the other products that are produced from petroleum? The link below says 46% of oil goes to gasoline production.
LIST OF PRODUCTS MADE FROM PETROLEUM | EnerGyne Resources, invest in oil wells in Texas & Lousiana
The question isn’t necessarily directed to you GH. i just used your post for a reply.
Logically, since the total demand for petroleum would be reduced, the prices for other petroleum products should fall accordingly.
I could see that. But I’m wondering if the prices for these other products would have to increase because of the fixed costs in bringing oil to market. The exploration, drilling, pumping, and transporting costs I think would stay about the same, but 46% of the market would be gone. The 54% would have to bear the full costs of getting the oil to market. I don’t know what the profit margins are for fuel, but it seems like the oil companies do extremely well in the good times. Would they do well enough without the 46%?
yes. If your neighborhood gas station gets only 200 cars instead of 500, it becomes financially unviable. Remember, EVs can be charged at home, so millions of gas station equivalents. With 500+ mile range, lot less need for chargers.
XPeng has come out with $16k EV car. Tesla coming out with $25k car soon and then there is autonomy. I predict in 10-15 years it will look very different (not 50 as some of you are saying).
There are economies of scale for sure. On the other hand, if you are in a scenario of decreasing secular demand, then there is less need for CAPEX, exploration costs go way down, spending less on distribution, etc.
It took 16 years to get to 8% market share and in next 10 ~ 15 years you expect it will be 100%… TSLA and its shareholders are living in mars… 
Jokes aside, your expectations are not grounded in reality.
Except supply will drop accordingly, the new equilibrium price may higher or lower. Increasing demand can reduce price due to economies of scale when supply catches up. The opposite can happen with decrease of demand.
The point is that compared to other increases in the grid capacity over the last 100 years this is not an insurmountable upgrade. And a LOT of that capacity can be nudged into the middle of the night, thus not that big of a deal.
Mike
Production will fall over time as well.
The price is relative. It will be about the same but with a wide range of prices.
That is why I said it is not linear.
It starts slow, then accelerate, then pause, then reaccelerate, then what remains of Blockbuster and Border cafe
I understand the hockey stick, bell curve, etc. We are not there. But I guess we both have our views. Let us see what future delivers! Good luck.
Uh, since you didn’t link to this BP report, I went to the source. It turns out you have it exactly backwards. They don’t say peak oil is in 2025, in fact they show oil demand continuing to increase through 2050 and beyond. I’ll explain it in longer detail, but for those who won’t read, here’s their chart. Yes, it’s from the (very) interesting 20 page analysis of oil demand and the future.
You’ll notice that the BP (base case) show continuing growth in oil demand through at least 2040. There is another BP case (extra-fast transition) which shows a relative flatline beginning next year, true, but they don’t really believe that.
Indeed, they don’t really think much of these estimates at all, including their own. They launch the report saying:
Much of the popular debate is centered around when oil demand is likely to peak. A cottage industry of oil executives and industry experts has developed, trading guesses of when oil demand will peak: 2025, 2035, 2040? This focus on dating the peak in oil demand seems misguided for at least two reasons.
First, no one knows: the range of uncertainty is huge.
Twenty pages of analysis later they say:
Peak oil demand is all the rage. … This focus seems misplaced. The date at which oil demand will stop growing is highly uncertain and small changes in assumption can lead to vastly different estimates. More importantly, there is little reason to believe that once it does peak, that oil demand will fall sharply. The world is likely to demand large quantities of oil for many decades to come.
There are several interesting points in the paper. One is that there is a “social” cost to oil. Some countries are entirely dependent on extracting it, else they will collapse. Try as they might, most have not found a way to transition to some more balanced economy, so they are going to produce irrespective of demand. Even if the price craters, they will pump.
If that would happen, the price will obviously fall, but that will create a countercyclical effect: all those things pushing so hard for conservation, lower costs, etc. become less important. (Real world observation: small cars gained popularity during the OPEC embargo, and when that ended we went back to big fat Chevy’s and Ford’s. This is the so-call “rebound effect”.) Pretend gas went to $1/gal (which I do not expect). What would that do to EV demand?
An interesting sidebar is that of the cost of marginal production, and BP notes that there are enough proven reserves right now to fuel the world through 2050 twice over without a new drop of oil being found. The marginal cost of extraction in many places is under $10 a barrel, (and again, some economies depend on it both for cash export as well as domestic employment), so the spigots are not going to turn off. There are second level costs, of course, more exploration, research and improvement in technique, distillation, creation of new uses and so on, but it’s extraction that’s key, and that’s gonna continue.
For those truly interested in the macroeconomic future of oil, I’d suggest reading pages 12-16, where the authors talk about leaving behind the “age of scarcity” we’ve been living in, and realizing that there are so many oil resources that some will never be pumped, as companies become more competitive and the costs move toward the low cost marginal costs of extraction leading us into an “age of abundance”, and what that might portend for various economies - those well balanced, and particularly those which are not.
I don’t agree with all of the scenarios plotted, but then I don’t have to. It’s clear that oil is going to continue to be a major energy force for the foreseeable future, and pretending it’s suddenly going to collapse is folly.
Personal note: World COAL production is still ascendant fer cripes sakes, albeit at a lower rate of increase, and it’s harder to mine, harder to transport, and harder to use than petroleum. Humans have an infinite appetite for energy. Oil’s gonna be around long after all of us are gone.
Oh. Coal chart:
Report does not talk about year over year progress in EV battery energy density and costs which is the main competition. This is a serious omission.
It is like talking about number of horses needed in coming decades when there are automobiles popping up everywhere in 1920s.
Isn’t the current situation more like a hypothetical introduction of a new horse in 1890 that ate different food? The EV SUV still has the same shape, speed, load capacity, etc. as an ICE SUV.
DB2
Every two weeks, I make a long commute to spend a couple of days on-site. Returned from my latest commute on 09/11/24. I paid 15-20% more per gallon for gas on this trip, than the prior trip.
YMMV (no pun intended).
It’s an interesting comment. Here’s a chart of global auto production from 1900. Notice anything?
Henry Ford began producing the Model T in 1908. But the first cars were being produced even before 1900, they were just being made in craftsmen shops. Anyway, from 1900, it took forty years before there was a significant upturn - big enough to engender trhe kinds of life changing effects we have seen: roadways being constructed, gas stations littering the landscape, teenagers making out on Lovers’ Lanes, and so on.
I don’t claim this is a perfect replica of what will happen with EV adoption, or with gasoline consumption. It’s just yet another example of how long it takes even for most revolutionary products to enter the realm and make enough difference to “change the world.”
In 2023, Tesla Model Y was the best-selling car in the world in 2023. It surpassed traditional top-sellers like the Toyota RAV4 and Corolla, with sales totaling around 1.22 to 1.23 million units globally.
So, added 0.00086% of the 1.5 billion total cars on the road today, worldwide. Great achievement, but it might take a while to show up in the gasoline stats.
Many were talking about “total newspapers circulation” when internet was in its infancy. I keep on saying, it is NOT linear.
Newspapers have a shelf life of one day, and were easily replaced by electrons for anyone with a terminal.
Cars have a shelf life of 25 years, and will stay on the roads for decades. That will impact gasoline consumption in ways entirely differently than “information”.
Yes it will happen., No it will not happen tomorrow.
