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Tesla Motors Inc (TSLA) is Leading the Charge Against Big Oil

Tesla Inc (TSLA)

Tesla Motors Inc (NASDAQ:TSLA) is already leading the charge to take a big bite out of the global oil demand and the firm seems unstoppable. Last month, news broke that Tesla’s gain is the loss of the global gasoline market. The International Energy Agency says electric cars are killing the global gasoline market and the trend can’t be reversed.

Now, the global gasoline market should prepare to cede more ground to a trend that analysts are calling the “Tesla Effect”. The Tesla Effect is simply a paradigm shift that disrupts how people think about transportation. CEO, Elon Musk is also pushing zero tailpipe emissions, and it will force carmakers to devote more energy to building EVs. This article explores how Musk and his seemingly ragtag team managed to pull of one of the biggest market disruptions of the century.

Tesla could shave off 2 million bpd of oil demand by 2025

Tesla Motors Inc (NASDAQ:TSLA) is a niche player in the global auto market – it is not likely to produce 500,000 car per until 2017 at the earliest. EVs in general take less than 1% of total vehicle sales; yet, analysts posit that EVs might take the lead over ICEs by 2025. Many countries are working towards stricter emission standards on cars and some countries are adopting a tougher stance to phase out diesel vehicles.

Analysts at Wood Mackenzie posit that EVs could shave off as much as 2 million barrels per day from global oil demand by 2035.  Alan Gelder, VP refining, chemicals, and oils markets at Wood Mackenzie observe that the moves to reduce emissions and pollutions are bad news for the oil markets. In his words, “anything that reduces the demand for transportation has an impact on the oil market… The question is how big is it going to be and what’s the time frame.”

2035 looks to be a long time away but EVs have already started nibbling at the global oil demand. Analysts posit that EVs have started to displace about 50,000 barrels per day from the global oil demand and that the slowdown in demand can only increase.

Tesla Motors Inc (TSLA) Factory Freemont, California

How big of a dent can Tesla make in oil demand?

Tesla Motors Inc (NASDAQ:TSLA) is only one firm and it is not likely to make much of an impact on the global oil demand alone. In fact, many oil firms are not worried about the paradigm shift to EVs because total oil demand will maintain its growth for the next couple of decades.

The petrochemical, trucking, aviation, and shipping industries will continue to fuel the demand for oil going forward. In the worst case scenario, oil firms will be forced to reduce their gasoline output and focus more on fuel for other industries.

Nonetheless, the fact that many startups are trying to get into the EV business suggests that EVs might phase out gas guzzlers much faster than expected. More so, traditional automakers such as GM, Ford, Mercedes-Benz, Volkswagen, and BMW among others have also started building EVs. Gelder observes that EVs might enjoy a faster adoption if “battery technology gets cheaper and EVs don’t need a subsidy.”

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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