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Fitch says investors could sell out of energy companies

Oil companies should be scared of electric vehicles.  So says a report released this week by the Fitch credit rating agency.  Rapid innovation in batteries could trigger an “investor death spiral” in which spooked owners of oil stocks sell them off, and loans and credit for new oil projects become hard to obtain.  Wise oil companies will diversify now and invest in batteries and renewables, the report says.

Electric cars are a particular threat, according to Fitch, because transportation is a huge user of oil — it accounted for about 55 percent of total oil use in 2014.  But a leap forward in batteries would also hit utilities hard, since it would eliminate the need to keep coal and natural gas plants running in order to balance the intermittent electricity generated by wind and solar installations.

The report is the first in a series that Fitch is doing on how rapid technological improvement could disrupt business as usual.  It’s outlining a long-term scenario rather than making predictions.

Still, serious disruption could happen even without technological breakthroughs.  “One of the most difficult things for oil companies,” the report’s lead author, Alex Griffiths, told the Financial Times, “would be if China decides, ‘Actually we don’t want petrol cars in five years’ time.'”

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