Electric cars no threat to Big Oil
Exxon and BP forecast that electric cars and hybrids will account for only 4% to 5% of the global fleet in the next few decades.
Both companies released projections for the next two to three decades, and forecast that electric cars and hybrids will make up 4% to 5% of the global fleet even after decades of development. These forecasts are at odds with projections by independent consultants like McKinsey and government targets, which see electric vehicles taking on a much bigger role in transportation in the future.
We have a $93 price estimate for Exxon Mobil, which is at a 10% premium to its current market price.
According to BP CEO Bob Dudley, who released the company's statistics review a couple of weeks ago, 87% of the transport fuel used in 2030 will be petroleum-based, and oil will continue to be the dominant power source. Biofuels, natural gas and electricity will supply the rest of the energy needs. And by that time, electric vehicles and plug-in hybrids will constitute about 4% of all vehicles, according to the company.
Competitor Exxon Mobil held a starker view, pointing out that higher costs of electric vehicles would mean that their sales would not show much growth even in the 2030s and that, by the end of 2040, only about 5% of all vehicles would run on electricity, natural gas or hybrid plug-in technology. The forecasts, however, do not consider breakthroughs in battery technology that can reduce the cost of manufacturing electric vehicles.
Despite the dominance of oil-driven cars, the forecasts predict a peak in oil demand in the 2020s because of stringent fuel efficiency standards and rising biofuels production. However, this could be countered by higher aviation and commercial vehicle usage.
Impact on oil prices
Along with pressures to meet growing demand from developing Asian countries, the oil industry is facing difficulties in adding capacity while also covering for the natural decline seen in existing fields. Strong demand kept crude oil benchmarks above the $100-a-barrel mark for most of 2011, despite multiple economic shocks. Oil companies earn a large chunk of their value from the production of crude oil. With limited alternatives, prices will continue to increase in the future with rising demand constraining reserves.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
In this installment of Investor Beat: The Fed chief tells Congress that it's too soon to end the stimulus program.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.