Death to old Fossils! Now for some really Good News.

I cannot begin to stress enough the the odious influence Oil has had on mankind.

 Everything it touches it corrupts, pollutes and destroys—and in all honesty we could all have used a lot less of it if we had not been consistently hoodwinked by the bad guys. But that hood is about to eviscerated. I have demonstrated this (the evils of oil) fact in other writings – so I will not be dwelling on it here. This will be a good news blog. This blog will explain why oil is dead -just no one realizes it yet. But this blind-spot is now on its last legs, because the Math is irrefutable. I had already discussed one part of this equation here which discussed how various countries are implementing clean technology at a rapid rate – even though oil and coal remains cheaper. It does not matter how cheap oil gets -every one except the GOP and their sponsors understand the game and are enacting a plan. Even the Saudi’s will be restructuring their economy accordingly.

I recently read a Bloomberg article that would strike many people as a bullish take on the prospects for clean energy. But as I read it, whilst recognizing that it meant well and that it was making numerous good points, I also became infuriated by how far behind the curve it remained, how it made its own mathematical mistakes and how readily it defaulted to orthodox thinking. 

In trying to explain some of the appalling lack of imagination, and second rate math that makes up the back bone of the Bloomberg article I have decided to try a new writing technique. I have simply copied and pasted pretty much the whole article and I will grade it much like a Middle School teacher might grade a thesis written by a 12 year old . I will use ticks and crosses to indicate correct and erroneous statements. A thumbs down will indicate a sub par opinion. For the first half of the article I will make little effort to explain my criticism’s, to avoid repetition later on and to let the article dig its own hole so deep, that by the time I put my spotlight on it, you will have little difficulty in side stepping Bloomberg’s rather deep pit. My comments will all be in Blue Font -to avoid any confusion. 

Grading the Bloomberg Article: (I will add flesh to my criticisms toward the end of article)

With all good technologies, there comes a time when buying the alternative no longer makes sense. Think smartphones in the past decade, color TVs in the 1970’s, or even gasoline cars in the early 20th century. Predicting the timing of these shifts is difficult, but when it happens, the whole world changes.

It’s looking like the 2020’s will be the decade of the electric car.

Battery prices fell 35 percent last year and are on a trajectory to make unsubsidized electric vehicles as affordable as their gasoline counterparts in the next six years, according to a new analysis of the electric-vehicle market by Bloomberg New Energy Finance (BNEF). That will be the start of a real mass-market liftoff for electric cars.

By 2040, long-range electric cars will cost less than $22,000 (in today’s dollars), according to the projections. Thirty-five percent of new cars worldwide will have a plug.

All 2040 projections wrong –this I will explain later. (EV=Electric Vehicle)

This isn’t something oil markets are planning for, and it’s easy to see why. Plug-in cars make up just one-tenth of 1 percent of the global car market today. They’re a rarity on the streets of most countries and still cost significantly more than similar gasoline burners.

OPEC maintains that electric vehicles (EVs) will make up just 1 percent of cars in 2040. Last year Conoco Phillips Chief Executive Officer Ryan Lance told me EV’s won’t have a material impact for another 50 years—probably not in his lifetime.

This is an epically idiotic contention as I will explain later.

But here’s what we know: In the next few years, Tesla, Chevy, and Nissan plan to start selling long-range electric cars in the $30,000 range. Other car makers and tech companies are investing billions on dozens of new models. By 2020, some of these will cost less and perform better than their gasoline counterparts.     

The Luxury Tesla Model S is already arguable better value that its peer group, especially when you factor in the 5 year cost of ownership. Admittedly the competitive advantage is assisted by $7,500 federal Tax credit (before even taking into account additional state tax credits.)

The Model 3 by 2018 will clearly be better value than it’s peer group. So this Bloomberg estimate is too pessimistic by 2-4 years, depending on how you look at it. This is a massive margin of error since we are projecting the very near future.

The aim would be to match the success of Tesla’s Model S, which now outsells its competitors in the large luxury class in the U.S. The question then is how much oil demand will these cars displace? And when will the reduced demand be enough to tip the scales and cause the next oil crisis? 

First we need an estimate for how quickly sales will grow.

Last year EV sales grew by about 60 percent worldwide. That’s an interesting number, because it’s also roughly the annual growth rate that Tesla forecasts for sales through 2020, and it’s the same growth rate that helped the Ford Model T cruise past the horse and buggy in the 1910s. For comparison, solar panels are following a similar curve at around 50 percent growth each year, while LED light-bulb sales are soaring by about 140 percent each year.

This above paragraph is the pivotal point of the whole article.

Yesterday, on the first episode of Bloomberg’s new animated series Sooner Than You Think, we calculated the effect of continued 60 percent growth. We found that electric vehicles could displace oil demand of 2 million barrels a day as early as 2023. That would create a glut of oil equivalent to what triggered the 2014 oil crisis.                                         

Compound annual growth rates as high as 60 percent can’t hold up for long, so it’s a very aggressive forecast. BNEF takes a more methodical approach in its analysis today, breaking down electric vehicles to their component costs to forecast when prices will drop enough to lure the average car buyer. Using BNEF’s model, we’ll cross the oil-crash benchmark of 2 million barrels a few years later—in 2028. 

Since the cost of electric cars will be clearly cheaper than a fossil car by 2022, even without subsidies, this will be the obvious trigger point of a massive increase in demand. Virtually everyday there are new announcements that will be promoting change, whether it’s Ford Investing Billions to compete (their CMax and Fusions will just not cut it), or Germany announcing Billions of new tax credits for buying EV’s to Dubai announcing that by 2030 —25% of all Cars will be autonomous:  Watch and Weep. 

Compound annual growth rates as high as 60 percent can’t hold up for long, so it’s a very aggressive forecast. BNEF takes a more methodical approach in its analysis today, breaking down electric vehicles to their component costs to forecast when prices will drop enough to lure the average car buyer. Using BNEF’s model, we’ll cross the oil-crash benchmark of 2 million barrels a few years later—in 2028.

I will explain what is wrong with this graph after I rework the next graph – but this above graph is based upon erroneous assumptions regarding the cost of batteries.

Predictions like these are tricky at best. The best one can hope for is to be more accurate than conventional wisdom, which in the oil industry is for little interest in electric cars going forward.

Conventional wisdom, especially oil based conventional wisdom is absurdly off base.

“If you look at reports like what OPEC puts out, what Exxon puts out, they put adoption at like 2 percent,” said Salim Morsy, BNEF analyst and author of today’s EV report. “Whether the end number by 2040 is 25 percent or 50 percent, it frankly doesn’t matter as much as making the binary call that there will be mass adoption.”

BNEF’s analysis focuses on the total cost of ownership of electric vehicles, including things like maintenance, gasoline costs, and—most important—the cost of batteries.

Batteries account for a third of the cost of building an electric car. For EVs to achieve widespread adoption, one of four things must happen:

1. Governments must offer incentives to lower the costs.
2. Manufacturers must accept extremely low profit margins.
3. Customers must be willing to pay more to drive electric.
4. The cost of batteries must come down.

The first three things are happening now in the early-adopter days of electric vehicles, but they can’t be sustained. Fortunately, the cost of batteries is headed in the right direction.

Now let us look at all the things wrong with the above chart – errors that actually contradict Bloomberg’s own analysis, let alone all the factors that they are totally overlooking:

UPDATE to the above graph. Yup it looks like they have done it again -beating projections by a wide margin – so even my projection – the blue line, is significantly too conservative: 

Tesla’s Vice-President of Investor Relations, Jeff Evanson, jumped in on the call between Langan and Bereisa to correct their analysis. Evanson stated that Tesla’s battery pack cost is already below $190/kWh – meaning at least 26% less than Bereisa’s current estimate

More Errors in Bloomberg’s analysis:

1. The Bloomberg graph implies that EV will only become undeniably cheaper than a fossil by around 2027. I point out that this turning point will come around 2021-2023.

2. Battery costs today are getting close to $200 per kWh (now it is $190) – by the time Tesla’s humongous factory gets cranking they will likely fall by at least 30%   –in time for their Model 3 (late 2017-early 18) –and will then keep falling.

3. In my chart I illustrate how range anxiety will soon be a thing of the past. This concern will be further eroded by the explosion of ever faster charging stations.

4. Bloomberg fails to point out:

1. Cost of ownership for an EV will be less. (gas, maintenance, depreciation.)
2. The Tesla Model S is probably the safest car on the road, and the reasons should be simple to understand.
   1. No engine in the front, massively increases crumple zone, safeguarding occupants from front end collisions.
   2.  the fossil car contains up to around 18 gallons of highly combustible liquid, always a  concern and in civil unrest scenario’s, fossil cars can be quickly turned into a Molotov cocktail.
      
3. Not only will batteries get less expensive, but life expectancy will likely increase from 250,000 to 1,000,000 miles
4. Additionally, unlike an engine – a battery will still have value after its’s “life expectancy” and can be put to use for other functions, (storing energy for night time usage)
5. After this Lithium Ion batteries can then be recycled
6. The Smart money, the smart people are now in EV’s – Tesla. Google, Apple, Venture Capitalists are now focusing on this – not in Detroit, but in Silicon Valley.
7. EV cars can be upgraded, maintained via downloaded software.
8. Autonomous driving is here – thus the whole transportation infrastructure is about to be disrupted –old technology will rapidly become obsolete. This below video will illustrate how human drivers will  inevitably cause un necessary traffic jams. I the below cars were autonomous they could probably travel at around 100 MPH with out an issue (i’s am postulating – since I am not sure such an experiment has been undertaken) regardless the below drivers were instructed to travel at a constant 30 KPH – now see what happens:
9. Average consumers (who do not need specialized auto’s) will by 2022 look at fossil cars as a joke –similar to the way we now view those early satellite phones. Not long after that driving will no longer be a necessity, it will evolve into a hobby – and then a reenactment for nostalgic types or an off road extreme “Mad Max” sport.
10. EV cars will have far better performance than fossil Cars:

  11. EV cars will have far better performance than fossil Cars:

Let there be no doubt that the Model 3 will end up doing far better than the above understated guideline. Plus they will have versions able to do “ludicrous mode” at 2.5 seconds and trending down

Electric (Hybrid) Customer Satisfaction:

Tesla Customer Satisfaction compared to other Luxury Cars:

Now let us look at key features amongst the Luxury Car segment:

The key areas to look at are cargo space, repair costs and value –all features that are sure to be mirrored by the Tesla Model 3 since this car will not need an engine, fuel tank, radio fluid, Oil fluid, standard battery, and dozens of other items. Yes it will need a much larger battery, but that has been integrated into the chassis.

Soon to be redundant fossil items:

What could delay this virtually inevitable trend –and make Bloomberg correct.

• An Earthquake taking out a Tesla’s factory
• GOP gaining total control –and bringing in legislation sponsored by Oil, Coal and Koch lobbyists etc.
• The Model 3 tuning out to be total lemon.
• Tesla suffering a cash flow crisis and then bought out by a fossil car company.

There’s another side to this EV equation: Where will all this electricity come from? By 2040, electric cars will draw 1,900 terawatt-hours of electricity, according to BNEF. That’s equivalent to 10 percent of humanity’s electricity produced last year.

The good news is electricity is getting cleaner. Since 2013, the world has been adding more electricity-generating capacity from wind and solar than from coal, natural gas, and oil combined. Electric cars will reduce the cost of battery storage and help store intermittent sun and wind power. In the move toward a cleaner grid, electric vehicles and renewable power create a mutually beneficial circle of demand.

And what about all the lithium and other finite materials used in the batteries? BNEF analyzed those markets as well, and found they’re just not an issue. Through 2030, battery packs will require less than 1 percent of the known reserves of lithium, nickel, manganese, and copper. They’ll require 4 percent of the world’s cobalt. After 2030, new battery chemistries will probably shift to other source materials, making packs

lighter, smaller, and cheaper.             

Despite all this, there’s still reason for oil markets to be skeptical. Manufacturers need to actually follow through on bringing down the price of electric cars, and there aren’t yet enough fast-charging stations for convenient long-distance travel.

This issue becomes moot as charging stations grow exponentially and as range increases rapidly.

Many new drivers in China and India will continue to choose gasoline and diesel. Rising oil demand from developing countries could outweigh the impact of electric cars, especially if crude prices fall to $20 a barrel and stay there. 

This has to be most depressingly inaccurate assessment for the following reasons:

• These Countries have agreed to the climate change treaty.
• The Climate is only going to get worse, increasing the pressure for compliance, and implementing more ambitious targets.
• Cities like Beijing are already becoming uninhabitable during certain months of the year, China’s soil is becoming so polluted as to threaten their food supply. New transportation capabilities will rapidly change consumer habits. People will not need to own multiple cars. Young people will not want to be burdened with the ever sillier costs of car ownership.
• Eventually people will figure out that Oil only assists bad people— climate deniers, Russian/Iranian imperialism –Saudi Arabia’s funding of Islamic fundamentalism, people funding the GOP. 
• Falling oil prices should hardly be an issue for any one with even half a brain –most Counties already tax oil significantly,  it is surely a no-brainer that as oil prices collapse, oil should be taxed more –such revenues to be passed back into the pockets of the “middle class.”

The other unknown that BNEF considers is the rise of autonomous cars and ride-sharing services like UBER and Lyft, which would all put more cars on the road that drive more than 20,000 miles a year. The more miles a car drives, the more economical battery packs become. If these new services are successful, they could boost electric-vehicle market share to 50 percent of new cars by 2040, according to BNEF. 

Again, whilst making a perfectly sensible point – it is mind boggling how they can still somehow manage to introduce so much nonsense…

• “If Uber etc. are successful” let there will no mistake – these services will be successful until new technology makes them redundant*
• The amount of fossil vehicles sold as new cars by 2040, will be Zero.
• Remember that just a few years ago it was predicted that the cost of batteries would not reach $200 per kWh until 2040. But we will get to that point before mid-2018 (Update – we are already at $190 – in 2016)

*Thank heaven for this fact –because without such technology the UBER algorithm, while mainly benefiting consumers, and temporarily benefiting “taxi” drivers would eventually turn “taxi driving” into a zero sum game, with ever more amateur drivers effectively working at a loss –becoming economic slaves to the future UBER shareholders.

One thing is certain: Whenever the oil crash comes, it will be only the beginning. Every year that follows will bring more electric cars to the road, and less demand for oil. Someone will be left holding the barrel.

The second oil crash will happen far sooner than this article is suggesting. In fact if it was not for orthodox thinking – It would already be heading below $20 a barrel.

Oh and just in case you think I am smoking something -well this epic change has begun -it is already having an impact.

The two largest emitters, China and the United States, both registered a decline in energy-related CO₂ in 2015. In China, emissions declined by 1.5%, as coal use dropped for the second year in a row. The economic restructuring towards less energy-intensive industries and the government’s efforts to decarbonise electricity generation pushed coal use down. In 2015, coal generated less than 70% of Chinese electricity, ten percentage points less than four years ago (in 2011). Over the same period low-carbon sources jumped from 19% to 28%, with hydro and wind accounting for most of the increase. In the United States, emissions declined by 2%, as a large switch from coal to natural gas use in electricity generation took place.

So  I have explained why EV’s will soon deliver the killer blow to gasoline and thus oil production – but is it correct to put so much weight on the automobile sector, and how can we be sure that fossil cars will soon be buried, and when will this burial take place. See part 2 (coming soon)