A new report claims that the economics of renewables are impossible for oil to compete with where the energy is being used to power cars and other light-duty vehicles.
The research from BNP Paribas Asset Management says that renewable electricity has a short-run marginal cost of zero, is cleaner environmentally, and could readily replace up to 40% of global oil demand.
The analysis indicates that for the same capital outlay today, new wind and solar-energy projects in tandem with battery electric vehicles will produce 6x – 7x more useful energy at the wheels than will oil at USD 60/barrel for gasoline powered light-duty vehicles, and 3x – 4x more than will oil at USD 60/barrel for light-duty vehicles running on diesel.
Accordingly, the research calculates that the long-term break-even oil price for gasoline to remain competitive as a source of mobility is USD 9 – 10/barrel, and for diesel USD 17 – 19/barrel.
The report predicts a tough road ahead for oil, saying that the industry ‘has never before in its history faced the kind of threat that renewable electricity in tandem with electric vehicles poses to its business model.’
It concludes by warning that ‘the economics of oil for gasoline and diesel vehicles versus wind- and solar-powered EVs are now in relentless and irreversible decline, with far-reaching implications for both policymakers and the oil majors.’
Read the full report here.