Electric Vehicles could displace 2 million barrels a day of oil demand as early as 2023 which “…would create a glut of oil equivalent to what triggered the 2014 oil crisis”, according to Bloomberg New Energy Finance.
In its website, SAFE (Securing America’s Future Energy) reported that the IEA (International Energy Agency) and other agencies believe the Electric Vehicle market is set to grow fast enough to destabilize oil demand. Along with 128% growth in the Chinese market during the first half of 2016 and stronger than expected sales in the U.S., the world Electric Vehicle fleet could grow even faster in the coming years.
An analysis of copper’s demand vs. oil as demand is displaced by the Electric Vehicle Industry was published in the Financial Times by BHP’s VP of Market Analysis and Economics, Huw McKay in late October 2016.
As part of his analysis, McKay stated “The Tesla Model 3 and Chevy Bolt (both of which will be launched imminently) will be the first mass market EVs that can be driven 200 miles on a single charge — the minimum many commentators say is needed if cars solely powered by batteries are to go mainstream in the U.S.”
McKay further added that “Once EVs start matching conventional vehicles for convenience, the speed at which they become commonplace will depend primarily on price,” which he says is driven today by expensive battery packs. “The packs needed to power a midsized car for 200 miles currently cost about $15,000. So the models that use them are more expensive than a $25,000 Toyota Camry — America’s top selling passenger car last year.”
140 million EVs will boost copper demand to 11 million tonnes, with new demand equal to more than 1/3 of current copper demand
By 2035, BHP believes there will be 140 million EVs on the roads, or 8 per cent of the total fleet of 1.8 billion light vehicles. That’s where copper demand takes off. McKay calls for a big boost in copper demand. “An average pure battery powered electric car requires about 80kg [of copper], four times the amount of a conventional vehicle. Most is spread across the wiring harness (roughly one quarter); the engine (roughly two-fifths) and the battery (roughly one-third).
BHP calculates that “Building the EV fleet will use about 11 million tonnes of copper. Subtract the amount that would have been used in the conventional vehicles ‘displaced’ by EVs, and that figure comes down to about 8.5 million tonnes of genuine new demand — equivalent to more than a third of total global copper demand today. At current prices this would be worth about $38 billion of a $100 billion annual market … That level of EV growth would displace about 2 MMBOPD of oil demand in that year, worth about $37 billion annually at today’s prices in a $1.8 trillion market.”
BHP’s McKay went on to say that “Long-term forecasting is not an exact science. At BHP we use scenario analysis to understand the range of plausible outcomes. For example, there is clear potential for EVs to use more copper than they do today as the class evolves. And it is worth noting that in our high case forecast, which assumes faster technological change and more policy support, the size of the EV fleet in 2035 is more than double what we incorporate in our mid case.”
SAFE projects that “Copper markets could be sent reeling with knock-on effects for other metals and global commodities, which are known to operate in boom-bust cycles thanks to long lag periods between upstream investment and actual production.”