Surprise, surprise: Oil majors face a "resoundingly negative" threat from the rise of electric cars

Francesca Washtell
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Go Ultra Low Electric Vehicle on charge on a London street
Electric cars will take another 20 years to comprise a quarter of the world's car fleet (Source: Getty)

A leap forward in battery technology could pose a "resoundingly credit negative" threat to the oil sector and disrupt global credit markets, according to a report from Fitch Ratings.

Falling demand for fuel could scupper oil majors' prospects in particular as transport accounts for 55 per cent of total oil consumption.

"Widespread adoption of battery-powered vehicles is a serious threat to the oil industry," Fitch Ratings said, and urged companies to prepare for "radical change".

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However, analysts added that a massive shift away from traditional fuel use is far from imminent and will take nearly two decades to pose a significant threat.

Fitch Ratings added:

Even if there were swift advances in battery technology, barriers to rapid shifts in demand would remain high.

The transition to electric vehicles (EVs) will be slow due to the need for infrastructure investment and the fact that new vehicles can have a 20-year lifespan.

We calculate that with a 32.5 per cent compound annual growth rate in EV sales it would be nearly 20 years before EVs comprised a quarter of the global car fleet. Overall growth in the global fleet due to rising emerging-market sales would also limit the impact on oil demand.

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A draft EU directive expected to be introduced in 2019 has stipulated that every new or refurbished house in Europe will need to be equipped with an EV charging point.

Ford recently announced its profit in 2017 will decline because of its increased spending on emerging opportunities and others, such as EVs and driverless cars.

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