Major oil companies are becoming increasingly worried by the threat of electric cars, according to one of the world’s leading credit rating agencies.
A report from Fitch Ratings stated that increased adoption of battery-powered vehicles is “a serious threat to the oil industry”, and warned that energy companies now need to adapt to survive.
Fitch’s report states that while it could take some time for electric cars to become a truly mass market option, the outlook for major oil firms like ExxonMobil and Shell isn’t good.
Outlook for oil firms 'isn't good'
Nervous asset holders selling off shares could create an “investor death spiral”, the report says, making debt and equity more expensive for the companies.
The report stated: “An acceleration of the electrification of transport infrastructure would be resoundingly negative for the oil sector’s credit profile.
“In an extreme scenario where electric cars gained a 50 per cent market share over 10 years about a quarter of European gasoline demand could disappear.”
Increased focus on renewable energy
Some oil companies already seem to be attempting to address the problem however, with French company Total buying the Saft battery group earlier this year.
BP is also interested in moving into the renewables market and is reportedly considering heavily investing in and expanding its wind-power business in the US.
Fatih Birol, executive director of energy think-tank the International Energy Agency, told the Financial Times that there was “no escaping” the rise of green technologies.
Sudden shock unlikely
However, he did recognise that the increase in the uptake of electric vehicles wouldn’t cause a sudden shock as it’s estimated that only 10 per cent of global oil demand comes from cars.
He said: “Last year was a record for electric cars with 500,000 sold. When you put that in context it is less than one car out of every 100 sold. Even if you assumed that, as of tomorrow, every second car sold was electric, global oil demand would still increase.”
