Hamish McRae: Not all of us dream of switching from oil and gas to electricity

When Mr. Bean, the world’s largest automaker, and OPEC’s top officials agree on something the rest of us should take notice.

Rowan Atkinson made headlines last week when the Green Alliance lobby group accused him of damaging the rollout of electric cars by writing a newspaper article in which he said they were boring.

That was a bit unfair since he was an early adopter. He had a nice little BMW i3, which a friend told me kept running out of charge.

It’s a tempting, if slightly ridiculous, idea that a single column by a comedian could have such a global impact. The reality is that the shift to fully electric cars has slowed not just in the UK but almost everywhere. The overall numbers are still rising, but at a lower rate than expected, as the flaws become clear.

So Toyota may be right to be skeptical about the cars’ uptake. Its president, Akio Toyoda, said last month that the company believes pure electric vehicles will reach a 30 percent market share. “The engines will definitely stay,” he said.

Car-nage: Mr Bean star Rowan Atkinson has been accused of ruining the take-up of electric cars by writing a newspaper article in which he said they were boring

Car-nage: Mr Bean star Rowan Atkinson has been accused of damaging electric cars by writing a newspaper article in which he said they were boring

Many plan on the continent and in the UK to ban sales of new petrol and diesel cars by 2035 – and a long way from Bloomberg’s forecast that electric cars will make up 70 per cent of new car sales by 2040.

There is a similar clash of opinions about oil’s long-term prospects. The latest forecasts issued by OPEC raised the level of potential demand in 2045 to 116 million barrels per day, compared to 102 million barrels per day last year.

By contrast, the International Energy Agency believes demand will start to decline by the end of this decade, and its long-term forecast sees it falling to 55 million barrels per day by 2050.

What should we make of this? You could say that both Toyoda and OPEC are talking by their books. It is in Toyota’s interest for internal combustion engines to remain part of the product line, because although the company pioneered the development of hybrid cars with the ubiquitous Prius, it has been relatively slow in producing pure electric cars.

As for OPEC, the longer oil and gas maintain their dominant share of energy supplies, the longer its members will need to build up their assets abroad and develop alternative sources of income.

On the other hand, if this view is half true and the transition away from oil and gas is slower than currently expected, there will be serious consequences for all of us, especially for the investment strategy.

To begin with, there will be greater resistance to governments that use environmental arguments to advance political goals. You see this already in the concern over the end of sales of gas boilers and cooking appliances.

Saying this is not to take a position on the issue. For the record, we have two heat pumps and own a Prius. The point is simply to point out that if the pace of the global oil and gas transition turns out to be slower than current policy anticipates, governments will struggle to maintain public support.

Next, we must realize that we are no longer in a world where the West decides or even significantly influences what everyone should do. The United States remains important and could remain the largest economy, despite the challenge posed by China. But the emerging world as a whole continues to make gains vis-à-vis so-called developed countries.

Note that since Russia’s invasion of Ukraine, India has joined China as the major market for oil.

As for investment, there are a series of effects. For starters, the slow transition away from oil and gas helps the US economy. The United States has become the world’s largest oil producer since 2018 and is increasing its dominance. It now pumps nearly a fifth of total global supplies.

This is by no means the only reason for its economy’s strong post-pandemic recovery, the fastest growth of any of the G7, but it is certainly one of the reasons.

It will also lead to a rethink of ethical investing. You can understand why some funds do not want to invest in fossil fuels.

However, if this option reduces Western companies’ investments in oil and gas exploration, it strengthens the relative position of OPEC and other non-Western suppliers.

Finally, in purely financial terms, this makes investing in Western oil companies a somewhat better proposition. They’re in a growth market, not a shrinking market, and you get a huge dividend yield.

(tags for translation) Daily Mail

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