Originally published on Forbes.com on June 18, 2022

Oil and gas companies who produce crude oil to make gasoline and diesel fuels should watch carefully the increase of electric vehicle sales — because continuing exponential growth may be disruptive.

The growth of EVs (electric vehicles) affects the oil and gas industry in an obvious way. Less gasoline for internal combustion engines means less crude oil refined into gasoline or diesel.

President Biden’s goal is 50% of new car sales to be EV’s by 2030. A zero-sum analysis of energy consumption in the US showed this implies a drop of 34% in crude oil demand.

If supply follows demand, then a 34% decline in oil production would be expected by 2030 – a third of oil production declining in less than 10 years. This would be a big hit to oil production in the US.

There is a caveat: the demand in the US may drop 34% but crude oil sales abroad to places like Southeast Asia may replace the demand and keep the supply up in the US.

Electric car stocks for passenger light-duty vehicles. Source: IEA Policies and Measures Database © OECD/IEA [6 June 2022].

How are EV sales doing?

The International Energy Agency (IEA) has published the data. In the chart, China is in orange, Europe in blue, and US is in green. BEV means battery-operated. PHEV is plug-in hybrid.

Sales of car EVs are increasing exponentially through 2021, and the trend is continuing into 2022. Globally, two million car EVs sold in the first quarter of 2022 compared with a year ago, representing a 75% increase.

16.5 million car EVs sold in 2021, up from 5 million in 2018. China is the big dog with 7.5 million sales in 2021. Europe is next with 5.5 million, while the US comes in third at 2.5 million. These numbers include battery-operated as well as plug-in hybrids.

In 2021, world-wide, almost 10% of all new cars sold were new car EVs.

It doesn’t show in the chart, but Norway leads the charge, with new sales over 60% EVs, far ahead of all other countries. The US is at a measly 4%.

The secret of success in Norway was policy – the government provided incentives so that the effective cost of car EVs was less than gasoline cars. The most popular car was a small car, the Nissan Leaf.

But not so in the US where Tesla models are a clear winner with total 71,000 sales (data from first half of 2020). Chevy Bolt sold about 8,000 and Nissan Leaf sold 3,000 in the same period.

In China, car EVs are smaller too. And the cost to make a car is less because an EV is much simpler in parts and operation than an internal combustion engine. Still, the median price of a car was 10% more than gasoline cars. But this differential is a lot less than in other countries.

The IEA report said five times more car EV models were available in 2021 than in 2015, with the number reaching 450 different models by the end of 2021. In the US, GM announced 30 new EV models by 2025, and Ford expects 40% of its global sales to be battery-electric vehicles by 2030.

Volkswagen is diving into EVs. The basic SRV, called ID.4, will be priced at $40,000 and have a range of 250 miles. Apparently, they even plan to build their own charging stations across the US. 

Minerals needed for EV batteries.

In previous years, battery prices declined. But batteries for car EVs could increase by 15% according to IEA. Lithium is the chemical elephant in the room because its price has increased 7 times since the beginning of 2021. Unfortunately, Russia supplies about 20% of lithium on the world market.

China is another potential problem, as they supply 75% of all lithium-ion batteries. Not only that, but over 50% of the refining of battery metals (lithium, cobalt, and graphite) and over 70% of production of anodes and cathodes, the guts of car EV batteries, take place in China.

Such factors could flatten the exponential increase of car EVs. But in the case of lithium, opportunities will open up. Australia, which has almost every mineral under the sun, is the world’s largest lithium producer, accounting for nearly half of global production in 2020.

The US has just one active lithium mine, in Nevada. But new lithium mines are in development in US states including Maine, North Carolina, and California, as well as Nevada.

And a strip of the Pacific Ocean, called the Clarion-Clipperton Zone (CCZ), is causing excitement. Potato-sized nuggets of battery metals have been discovered on the seafloor. CCZ is a large, deep plain at depths ranging from 13,000 to 20,000 feet that lies between Hawaii and Mexico.

The nuggets are polymetallic nodules that contain cobalt, nickel, copper, and manganese.  The simplest mining approach is just to vacuum these nuggets up. But environmentalists oppose this without a detailed impact study of how this would affect the biodiversity of the ocean floor — a study that could take years.

Further growth.

The Biden administration has announced a network of 500,000 EV charging stations across the US by 2030. Over 5 years they will provide $5 billion in aid to states to construct their own charging stations. 

To meet the climate goals of the transition to EVs, three things must happen in the US. First, the prices of EVs must become competitive with conventional vehicles. Second, many charging stations must be built across the US, and they have to be much larger than standard gas stations, because EVs can take an hour or more to recharge a battery.

Third, while car EVs are now 10% of the new vehicle market world-wide, truck EVs are way behind – only 0.3%. They would have to increase to 10% by 2030 to meet climate goals, the IEA report said. Only in China have truck EVs made a significant appearance on the roads. In the US, the good news is there are truck EV startups in the works.

High gasoline prices, that are likely to reach $6 /gallon according to one expert, may shift the public mood toward more car and truck EVs. But there are two headwinds: First, a longstanding faith in the reliability of oil and gasoline. Second, a resistance in the US Congress to policy changes.

Oil and gas companies who produce crude oil that’s made into gasoline and diesel fuels should be watching carefully the increase of electric vehicle sales — because continuing exponential growth will likely be disruptive.