Oil Needs to Be Below $20 to Compete with Electric Cars

The long-term breakeven oil price needs to be as low as $9 or $10 a barrel so that gasoline cars can remain competitive as a means of transportation in the future, BNP Paribas Asset Management said in new research this month.   

The research report—authored by Mark Lewis, Global Head of Sustainability Research at BNP Paribas Asset Management—introduces the concept of Energy Return on Capital Invested (EROCI) to measure how much a given capital outlay on oil and renewables translates into useful or propulsive energy at the wheels:  “in other words, for a given capital outlay, how much mobility can you buy?”

According to BNP Paribas Asset Management’s analysis, at present, for the same capital investment, wind and solar energy will already produce significantly more useful energy for EVs than oil at $60 a barrel will for cars and other light-duty vehicles (LDVs).

“For gasoline LDVs, we calculate the oil price required to yield as much net energy as would new renewables projects in tandem with EVs at $9-$10/bbl, and for diesel at $17-$19/bbl,” the report says.

“In short, whether in the form of gasoline or diesel, oil’s days as a fuel for LDVs are clearly numbered because our EROCI analysis shows that the economics of new wind and solar projects combined with EVs are set to become irresistible,” BNP Paribas said.  

The implications for oil majors are that “the challenge is on a scale that they have never faced before, and business-as-usual is simply not an option,” according to the report, which implies that current investments in oil projects with breakevens of $20 a barrel or higher could put as much as 40 percent of future annual output at risk of being stranded.

Read more at Oil Needs to Be Below $20 to Compete with Electric Cars