When I asked whether consumer choices are an act of political rebellion, I noted that it only took a 10% cut in coal demand to radically slash the coal industry's credit worthiness.
What if we could do the same thing for oil?
There's good reason to assume that just such a disruption is coming, and sooner than many people think. Consider these recent headlines from around the web:
— Smart cars going 100% electric in the US (Cleantechnica)
—Sydney Airport orders 40 more electric buses (Cleantechnica - again...)
—Vattenfall (a giant Swedish utility) converting entire vehicle fleet to electric
—20% of new buses in China are now electric (yours truly)
Headlines like these are coming so thick and fast these days that we have to pick and choose which ones we write about. Individually, they are all just a blip in the global picture of oil demand, but collectively it won't be long before they really start to add up. And when they do start to add up, it won't take too much cut in demand to radically reshape the future prospects for oil.
Of course, all of the above stories are about adoption of existing technologies at current pricing. But what if prices were to fall further, and faster, than they have so far? Wards Auto is reporting on conversations with auto industry insiders who say electric vehicle batteries should be under $100 per kilowatt hour by 2020, and $80 not long after that. That's a figure well below the $125 per kilowatt hour that the Department of Energy set in 2010 as a target for cost parity with internal combustion engines.
And once we reach cost parity, there's little that can be done by dropping tax credits or removing other incentives, to slow the march to electrification.
It's important to note, of course, that electrification isn't the only—or even the best—way to reduce oil demand. From massive investments in cycling infrastructure to growing transit ridership in many major cities, there are plenty of other trends underway that could squeeze oil demand from all sides. And once you squeeze oil demand enough, the infrastructural, political and economic advantages that Big Oil once enjoyed quickly start to melt away.
Take, for example, gas stations. In cities with high uptake of electric vehicles, decent transit and cycle infrastructure, and restrictions on polluting vehicles, how long will it be for sales to drop far enough that the current number of gas stations are no longer viable? And once gas stations start thinning out, there's one more reason for everyone else to abandon their gas cars too.
I look forward to revisiting this topic in ten years time. I suspect we may be pleasantly surprised at how quickly things have changed. I'll leave the last word to Tony Seba, whose ambitious predictions about oil industry disruption I've written about before. In response to a recent tweet from a certain Mr Musk, Seba had this to say:
I, for one, am beginning to believe he is right.