Recently, ExxonMobil put out a report that suggested that the growth of new and renewable energy technologies and the challenge of climate change were unlikely to significantly impact the oil business. The report stated that fossil fuels would continue to fill the lion's share of global energy demand for many years. Every drop of underground oil reserves would be needed and there was little risk that they could ever become "stranded" assets. In fact, things aren't so clear.
There is a natural human tendency to assume that things in the future will look a lot like they do today. Really big and disruptive changes are hard to imagine until they are upon us. But there are a few leading indicators that suggest that big changes are afoot in the world of transportation energy.
First of all, our demand for gasoline is already shrinking. According to U.S. government figures, overall U.S. consumption has dropped 4 percent since 2007. Partly it is a reflection of the lifestyle choices of millennials who would rather live in urban centers, than at the edges of metropolitan areas. Also, cars are rapidly getting more efficient. If you haven't shopped for a car lately, you might be surprised how efficient new vehicles have become, compared with just a few years ago. Kelley Blue Book says that 30 different new vehicles get combined EPA ratings of over 40 MPG. Not long ago, you could count those super-efficient vehicles on one hand--and they were all hybrids. By 2025, cars and light trucks sold in the United States will have an average fuel economy of nearly 55 mpg. All else staying the same, that fact alone will nearly chop in half our use of petroleum once those new vehicles roll out and the fleet turns over. But that is not the kicker. The real kicker is plug-in vehicles.
When marketers want to see what the consumers of the future will be buying, they look at California. Today in California, plug-in cars account for over 3 percent of all new cars sold. That might not sound like a game changer, but it is up from almost zero three years earlier. That is very rapid growth--much more rapid than the uptake of hybrid vehicles a decade earlier. And there is no indication that it is slowing down. People love these cars.
A recent survey asked plug-in vehicle drivers in California the reasons for their decision to get a plug-in. The top reason was saving money on fuel costs. Only about 1 in 5 cited the environment as the top reason. Other reasons cited included access to new technology, a desire for energy independence, use of carpool lanes and performance. Did we talk about performance? Because the electric motor has all of its torque available from a standstill, plug-in vehicles can often out-accelerate their gasoline counterparts. So there are plenty of very practical reasons that people buy plug-in vehicles--which is why uptake is growing rapidly. And the network of charging stations to support them is growing quickly as well--from 1,000 in 2010 to more than 25,000 today and continuing to accelerate.
When you look at all of these trends, the case starts to be pretty compelling that we will be using a lot less oil than we might have thought. It does not take a great visionary to see that within a decade, plug-in vehicles will be a sizable chunk of our vehicle fleet--and the remaining passenger cars will mostly be in the 40+ MPG range. And then? The air in our cities will be noticeably cleaner, we will be sending a lot less money and military hardware overseas to keep the oil flowing and some of those oil reserves might well find themselves "stranded" in the ground indefinitely.