Mar 27, 2018

How electric vehicles could help oil majors in the medium-term

Photo: Zhang Peng/LightRocket via Getty Images

A new analysis by Goldman Sachs looks at how the perception that low-carbon energy would cut future oil demand — especially via electric vehicles — could actually boost the finances of the world's most powerful oil companies over the coming decade or so.

Why it matters: The lengthy report and that counterintuitive conclusion underscore the complicated interplay between powerful legacy companies, emerging technologies and market behavior.

Big picture: It looks back at industry investment cycles over the past 40+ years: expansion, contraction, and one now taking hold again after the downturn called "restraint."

  • It's marked by "disciplined investments, further industry consolidation, structural cost deflation" and other forces.

Winners and losers: This heralds the start of a "new golden age" for the "reborn seven sisters," referring to ExxonMobil, Shell, Chevron, BP, Total, Equinor and Eni, the research predicts. Historically, the majors perform best financially during "restraint" phases.

Where EVs come in: One part of the report looks at how prospect of energy decarbonization, especially the focus on EVs, is among the forces helping to disincentivize investments in big, expensive supply projects. This will continue recent years of low investment in new supply projects.

The verdict: "Decarbonization and EVs could be the best thing that's ever happened to Big Oil," the Goldman Sachs analysis led by Michele Della Vigna notes. The report says:

"[T]he demand impact of EVs, even under the more bullish scenarios, is likely to be smaller than the supply displacement from fewer [final investment decisions] driven by the higher risk premium on long-term oil. "
  • EVs will likely cut oil demand by somewhere in the one to four million barrels per day range by 2030, while the oil production lost from projects delayed or scuttled since the 2014 downturn is in the 6 million range.
  • EVs are expected to start having a net tightening effect on the oil market in the 2020s.

Why this helps Big Oil specifically: The biggest companies stand to reap benefits in years ahead from their continued investments during the downturn.

"Like the ‘Seven Sisters’ of the 1950s, these global Majors are once again dominating complex, long lead time developments in non-OECD countries, locking in higher returns, better fiscal terms and a more reliable global oil services supply chain," the report states.

Go deeper: Bloomberg explores the report here.

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Coronavirus breaks the telecom bundle

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Consumers are adopting stand-alone broadband services at a much higher rate than just two years ago, and analysts predict that the economic downturn prompted by the COVID-19 outbreak will accelerate the trend.

Why it matters: With a recession looming, consumers may look to cut pay TV service in favor of more robust standalone internet packages once they're free to leave their homes.

America's funeral homes buckle under the coronavirus

Illustration: Aïda Amer/Axios

Morgues, funeral homes and cemeteries in hot spots across America cannot keep up with the staggering death toll of the coronavirus pandemic.

Why it matters: The U.S. has seen more than 10,000 deaths from the virus, and at least tens of thousands more lives are projected to be lost. The numbers are creating unprecedented bottlenecks in the funeral industry — and social distancing is changing the way the families say goodbye to their loved ones.

Navarro memos warning of mass coronavirus death circulated in January

Image from a memo to President Trump

In late January, President Trump's economic adviser Peter Navarro warned his White House colleagues the novel coronavirus could take more than half a million American lives and cost close to $6 trillion, according to memos obtained by Axios.

The state of play: By late February, Navarro was even more alarmed, and he warned his colleagues, in another memo, that up to two million Americans could die of the virus.

Go deeperArrowUpdated 2 hours ago - Health