The en masse electrification of commercial road vehicles despite rising oil prices in the next 15 years was highly unlikely said Chief Economist for British Petroleum, Spencer Dale.
Speaking to The Business on ABC TV, Dale said despite increases in electric passenger vehicles and fear of supply disruptions across the oil supply chain the demand would continue.
“The key demand of oil is within the transportation system. It drives not only our cars, it drives our lorries and our aeroplanes and so on,” he said.
“Only about 20 per cent of oil consumption goes into our cars. More goes into our trucks than goes into our cars. It’s worth remembering that.”
“I don’t see oil falling off dramatically any time soon.”
Dale, who is the former chief economist for the Bank of England, estimated that the estimated three to four million electric cars on the planet would increase to around 300 or 400 million in the next 20 years.
“It will reduce oil demand by about four-five per cent. That’s not clever economics. It’s arithmetic,” he said.
“The likelihood we will see a massive growth of heavy duty road haulage electrified in the next 10-15 years or planes for which I flew on from the UK 17 hours to Perth being electrified any time soon is relatively unlikely.”
Sanctions against Iran by the US have been the primary reason for the recent rise in oil prices said Dale with fear of supply disruptions helping to promote steeper increases in prices, which have doubled since November 2016.
The economic collapse of Venezuela, formerly one of the global powerhouses for oil exports, and sanctions on Iranian exports have added to concerns.
According to Dale, OPEC has looked to stabilise the market by bringing down levels of inventory from the unsustainable expectations prior to 2016 by producing more barrels.
Russia has since come on board to try and match production.
“Even if they’re successful in doing that, as they increase their production the margin for spare capacity in oil markets will decline and even in a market where there’s enough oil today the knowledge of the amount of spare capacity which is left just in case something else happens is still going to cause markets to have some degree of concern and that carries on pushing up on prices,” he said.
If Iranian exports continued to fall off prices would continue to rise he said.
“If Saudi Arabia, the other Gulf states and Russia can’t meet the supply which is coming off as a result of Iran and Venezuela then that would cause really significant pressure on prices,” said Dale.
“If the remaining spare capacity remains low that will cause alarming markets.”
He was reluctant to comment on whether oil would fetch a a barrel any time soon. Nor would he offer a forecast on the tipping point of peak oil, a pastime he has labelled misguided. He said there were narratives that suggested it could come as soon as five years or in 35.
“No one expects oil to drop off very sharply once it stops growing,” he said.
“Think plateau.”