Big Oil Loosing Control of Auto Industry

gasWhile the U.S. pats itself on the back for the riches flowing from fracking wells, an upheaval in clean energy is quietly loosening the oil industry’s grip on the automotive industry.

Presentations by analysts at Bloomberg New Energy Finance (BNEF) this week pick away at the idea that supply alone is behind the plunge in crude prices to $50 a barrel. The presentation also shows that low-pollution cars are gaining ground, weakening the link between oil and driving.

The result: Future transport is likely to look a lot different than what the major oil companies are fueling now. Instead of biofuels such as ethanol and green diesel making the internal-combustion engine fit into a world with greenhouse gas limits, wholesale new solutions are coming fast. ?Where we are is in an age of plenty,? said Michael Liebreich, BNEF’s founder. ?We have cheap oil, cheap gas, cheap renewables. You do have an abundance of supply in a way you haven’t had for decades. We also are in an age of competition.?

Oil Demand Has Flatlined for a Decade

Source: EIA

As the presentations indicate, oil consumption has flatlined for a decade as supplies from all those fracking wells surged. Through the economic boom, the financial crisis, and the recovery now underway, demand peaked in 2004 and has fallen ever since.

Dramatic Improvements in Miles per Gallon Cut Gasoline Demand

Source: US Dept of Transportation NHTSA

Part of what explains dwindling gasoline demand is as dull as it is important: efficiency. ?There was a 60 percent increase in efficiency of the U.S. auto fleet in the last 16 years,? Liebreich said. ?This is a global phenomenon.? And it’s one of the hidden reasons why the London-based research group doesn’t expect a quick rebound for crude.

Electric Vehicle Sales Quintupled in Four Years

Source: Bloomberg

Electric vehicles are starting to take off, with global sales of 288,500 units last year, according to BNEF research. While that’s just 0.5 percent of all car sales, it’s more than five times the number in 2011, and manufacturers are preparing for more.

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