One of the world’s largest credit rating agencies published a report yesterday on how rapid advances in battery technology could make electric vehicles (EVs) a preferred alternative to the internal combustion engine, with resoundingly negative implications for the oil sector.
Fitch Ratings says the threat of electric cars could create an “investor death spiral” as nervous asset holders sell out of oil companies, making debt and equity more expensive. On the same day, at the annual Oil and Money conference, the CEO of the Norwegian oil giant Statoilpredicted that oil demand will peak in the 2020’s and then decline due to the coming switch to electric vehicles.
Bloomberg News video on The Rise of the Electric Car
So why is the Trudeau government still talking about building new tar sands pipelines?
Statoil and the French oil company Total are both backing out of their tar sands investmentsand are investing in renewable energy and batteries in order to prepare for this new world, but most of the oil companies are still in denial.
This shift is the kind of move Fitch Rating report’s lead author, Alex Griffiths, told the Financial Times is necessary, adding that “If they [oil companies] stick their heads in the sand and try and pretend it will all go away, we think they will ultimately have issues. They need to have a plan.”
If oil companies need to plan for a world weaning itself off of oil, then so does Canada. Our federal government – like ExxonMobil, Shell and Suncor – has gambled heavily on the tar sands as an economic driver. But the combination of disruptive technology (lower cost renewables, batteries and electric vehicles) and the need to act on climate change means that we either start implementing a plan now for dealing with the coming disruption, or we will look like Kodak trying to sell film to iPhone owners.
The good news is that a plan to deal with an oil industry in decline looks a lot like a plan to deal with climate change.
So given the new reality, why are we still talking about pipelines?