Oil analyst considers the industry impact of electric vehicles, Tesla and the 'Elon Musk effect'

When will rising EV sales begin to cut into global demand for oil? It sure ain’t happening yet - as we discussed in an earlier article, over the past few years, the increasing popularity of trucks and SUVs has cancelled out the gas savings from EVs a thousand times over.

Above: A Tesla parked in front of oil wells (Image: Tesla Owner)

However, those who earn their daily bread from hydrocarbons are far from dismissive of the long-term threat. The electric wolf may not be anywhere near the door of the house that oil built, but it can be clearly seen hungrily prowling on the horizon. These days, oil industry observers are paying close attention to the progress of Tesla and other EV-builders.

One analyst who’s keeping a wary eye on the new technology is Stephen Schork, who has spent more than 25 years in the world of commodity and derivatives trading and written extensively on related subjects. Mr. Schork knows whereof he speaks, and he’s been predicting that alternatives to oil would curb demand in the long term since at least 2016.

Above: Oil analyst Stephen Schork discusses the oil industry and subsequent news surrounding Tesla (Source: Fox Business)

In a recent interview with Fox Business, Schork sounded, if not an alarm, at least a note of caution. Towards the end of a highly technical discussion about the outlook for oil prices, he said, “My overarching concern right now is the economic development. Tesla put 150,000 new Model 3s [on the market]. That’s 150,000 cars that don’t consume gasoline. And it’s not just Tesla - Porsche, Audi, BMW are all coming out with all-electric vehicles in 2019. So the inelasticities of demand in this market are fundamentally changing.” The moderator added that people tend to dismiss EVs until they drive one. “The torque is incredible...and it’s really a great driving experience,” she said, as Schork nodded in agreement.

Mr. Schork is far from the only petro-pundit to be concerned about the electric future. Several industry execs have recently conceded that the day of peak oil demand could be upon us sooner than previously predicted, and Shell, BP and Total are hedging their bets by investing in EV charging companies. Other players are taking a more combative approach, investing in the political process to try to stop, or at least slow, the Tesla-led transport revolution.

Above: Back in 2016, Oil analyst Stephen Schork was already talking about the 'Elon Musk effect' on the oil industry (Source: Fox Business)

The dynamics of the growing EV market vis a vis oil demand are complicated, to say the least. Contrary to popular belief, there’s no clear correlation between oil prices and EV sales, which have grown every month for the past two years, even as gas prices have been at historic lows. However, there’s no doubt that cheap gas has whetted consumers’ voracious appetite for trucks and SUVs, which so far remain a mostly unelectrified segment (except, of course, Tesla's Model X and Jaguar's I-PACE). If global demand for oil does begin to drop, gas prices are bound to fall further - that’s how markets work. Shifting demographics also affect the equation, and political developments are a huge wild card, so, while the arc of technological change is bending slowly towards electrification, it’s anybody’s guess what the timeline is going to be.


Written by: Charles Morris