The revolution in battery technology is accelerating and will soon change the auto industry beyond recognition. The same disruption might spell doomsday for big oil.
The price for lithium-ion batteries is falling so fast that it might soon be cheaper to drive an electric-powered car than a gas or diesel burner, Bloomberg New Energy Finance and McKinsey & Company reported. Battery costs have fallen by 65% since 2010 and costs will keep falling.
Electricity from lithium-ion batteries cost $1,000 a kilowatt hour in 2010 and $350 an hour in 2015, Bloomberg noted. Battery prices fell by 35% last year.
This means the cost of an electric car will the same as a gasoline powered vehicle within six years by 2022, Bloomberg reported. There is also a strong possibility that electric cars will cost less than diesel or gasoline vehicles at some point in the 2020s.
That will mean dramatic drops in costs for many industries including taxes. The cost of operating a taxi might drop by 3.1% to $2.76 a mile. Operating costs for self-driving costs might be as low 67¢ a mile by 2025. Demand for oil might drop by 13 million barrels a day by 2040.
Batteries might Trigger Investment Death Spiral
The picture is not as a rosy as we might think. Battery technology is advancing so fast that it will completely disrupt the utility and automobile industries.
That might cause losses of up to $3.4 trillion in the world’s credit markets in the form of utility and oil industry bond defaults, Fitch predicted. The worst case scenario would be a death spiral in the oil and utility industries that would see the collapse of many companies.
Shareholders might see an investor death spiral as oil and utility stocks lose all their value. A major side effect of that would be the collapse of national economies that rely on oil like those in Saudi Arabia, Russia and Venezuela.
Venezuela is already facing hyperinflation because its currency is worthless. The Saudi royal family has launched drastic policy changes designed to wean that nation off oil revenue by 2030.
The world’s oil use is expected to peak in 2030 and start falling after that, the World Energy Council predicted. Some countries like Norway and Germany want to eliminate fossil fueled powered vehicles by that date.
It looks as if the age of Big Oil is almost over and the age of big batteries has begun. If this continues gasoline and diesel powered vehicles and the oil industry might be history by the year 2050.