EV dreams & Oil
First, what are some EV purchase dreams?
A tranquil and responsive ride
Less pollution
Growing market demand encourages more investment for better batteries.
Faster transition to zero fossil fuel
Less fuel cost, more stable fuel prices for US businesses and consumers
Lower capital costs for commercial applications
Less oil profit for Russian and Middle East terrorists. Lower chance of yet another Middle East war over Oil.
An opinion written in Barrons by Christropher Smart “Peak Oil Is Near” suggests “The Path Down Will Be Treacherous” oil peak demand, while hard to predict exactly, will lead to reduced oil consumption and oil industry job loss. I think for fossil fuel use in light vehicles and heavy trucks we can predict more than the peak, we can predict when consumption will decline by 50% in the USA and why this milestone will make more of the EV dreams come true. These developments: New EV configurations will match gas vehicle choices (sedan, SUV, VAN, trucks etc); better battery technology with lower price points by 2026 will remove range anxiety. These developments will lead to 50% reduction in fossil fuel consumption in the US by 2033, lead by commercial use cases moving to EV to save money and growing acceptance of EVs as better than gas by most of the consumers.
The opinion by Christopher Smart is right on- oil consumption will decline at some point and jobs will be lost. Of course, this happened in Farming when farm automation moved 80% of the population working on farms to working off farms. The transition off oil for fossil fuel will affect less than 5% of US jobs, so will be a bit less of a transition. Fossil fuel consumes only 50% of oil, so my guess is the likely loss of Oil jobs will be around ½ % of US jobs.
A bit more on the EV dreams and why the trend away from fossil fuel might be faster than some folks are predicting.
What are the current benefits to EV’s over gas?
EV’s are more fun to drive. Tranquil, quiet and responsive is why many EV consumers say they love their EV.
Assume the EV price is equal to gas vehicles and range and refueling are not an issue, the EV share of the market would be higher, yes? It is 22% of new car sales in California now, is the trend to lower cost, better battery range and faster charging likely to grow EV sales faster in California and, perhaps, the rest of the US?
EV’s last longer than gas vehicles. The warranty on the best-selling EV’s is 120,000 miles or 8 years for both the drive train and battery. Many consumers are not aware of the progress in the expected life of the battery. CATL sells the most units in the low cost EV segment with their LFP battery. It has an expected life of 1,200,000 miles. The higher end EV battery life is around 300,000 to 500,000 miles. EV drive trains have an expected life of 1,000,000 miles. Gas cars that are used every day in stop and go use cases like police cars and uber and travel 100 miles a day will reach end of life in about 4 years. EV’s last longer, about 12 years in high stress applications, because their drive train is less complex, less to go wrong so inherently more robust. EVs will last much longer than 12 years in common consumer use.
EV crash protection is better than gas vehicles. Essentially the low center of gravity means fewer rollover accidents. Rollover accidents cause the highest damage to humans. The head on crash protection uses a longer, better energy absorbing design because EVs don’t have to deal with a very large engine entering the passenger compartment.
EV cost to maintain and fuel is less expensive than gas. Of course, the fuel savings depends on the gas vehicle you are moving from, the type of EV you are going to, the local cost of gas and electricity and the miles you drive. Some examples:
Gas price $5 a gallon, electric rates $0.11 per kwh.
Uber driver moving from gas car with 30 MPG and driving 100 miles a day x 5 days x 50 weeks. $3529 savings per year.
A fireman who changes from his 18 MPG truck, that he loves, to an EV that he also loves to drive for his 85 mile each way commute 42,500 miles a year. $10,721 per year fuel savings. He keeps his truck for truck stuff and the fuel savings pays for the Tesla in 5 years.
The life of the EV compared to gas in some cases offers big savings:
Police cars, as an example, are used 10 hours a day and never shut off the engine so that radio and computer are always on. The travel is stop and go about 125 miles a day. 45625 miles a year, with no rest for the engine and stressful stop and go travel for most of the miles, the police car life is about 4 years. An EV will last about 12 years- so capital costs for EV $60,000, for the gas vehicles it is 3 X $50,000 = $150,000 or the EV saves about $90,000 in capital cost over 12 years.
Why isn’t the EV 100% of new car sales? Well, that is where more EV dreams come in.
Consumers fear a short EV battery life? We can only dream of an effective consumer education program on this point as the current warranty and expected life should exceed expectations.
Consumers fear (nightmare) limited range. Ok, personally I have had EV range anxiety but after 4 years of driving an EV 70,000 miles that anxiety is gone. For my 20,000 miles per year driving, 267 mile range is enough. However, what to do about folks with no experience with an EV and who just don’t want any risk of limited range? This is where the dreaming needs to become real improvements in battery range and faster charging. For commercial use, the issue is sometimes a need for enough power to tow heavy loads for at least a full day’s of work. There are four announced batteries in 2023 that may turn those nightmares into dreams come true in 2026. Cheaper batteries with two times the power density address commercial use case need for more power and consumer anxiety is reduced with longer range with faster charging. More on this later, but how would twice the range at a lower cost change the pace of gas transition to EV?
My EV size or configuration is not available- Van size and configuration, pick up truck size isn’t quite what I want, SUVs are not quite the right size, the police car choices are not what our department wants and so on. The auto industry is investing 100’s of billions in new factories today to increase production rates, add new vehicle types and to offer configurations matching gas vehicles. The factory output of new models is ramping up over the next 3 years with new models from vendors constantly being introduced now. As an educated guess, 90% of the vehicle configurations desired by the market will be available in 2 to 3 years from several vendors.
Public charging is not everywhere. True, however for commercial use cases of light vehicles, it is not needed. Why? 95% of these cases don’t use more than 125 miles a day, never take long trips and are 100% covered by overnight charging. Having said that, fast public charging is being built out and, for the US, the Tesla fast charging system will be available to Ford, GM, Mercedes-Benz, Rivian, Nissan, Polestar/Volvo for existing EVs in 2024 using NACS adapters followed by built in support for new designs. Expect a major boost in fast charging locations and quality by 2026.
EV’s are too expensive. In 2024 new EV models from GM and other vendors enter the market at around $30,000. A new Chevy Bolt price is $27,500 in 2024. By 2026 or so Tesla plans to sell an EV for $25,000 and low cost options from off shore vendors are likely as well. After a tax credit of $7500, a $25,000 EV that saves $3600 a year on fuel cost and a better battery range likely means taking the leap from gas to EV starts to look pretty good. How about a new battery that offers a range of 425 miles and charging rate of 250 miles in 10 minutes available in the same low cost EV as an option. What do you think, will low 2026 EV price options and soon longer range and fast charge options increase the pace of EV sales?
Battery technology continues to improve.
Progress in Battery technology is more than a dream. There are about 20 development teams all claiming they have achieved twice the power per Kg than the best EV battery and at a lower cost, two have started production. So a range of 400 miles jumps to 800 miles and the cost drops. Or the price of a 400 mile range battery drops in half. Ok some of these development teams will make it to market some won’t. But with so many in early production phase today, 800 mile range likely will be available in 3 plus years and at lower cost. But who needs that? Likely no consumer, although many will want it. However, the 800 miles range implies a high power density. Commercial applications where heavy loads are being moved would put the higher power density to use. The towing range drops significantly for trucks towing their maximum weight loads. For sure commercial application market coverage will significantly increase with two times the power density.
For consumers, perhaps the most significant new battery that has entered production in 2023 is the CATL fast charging battery with 425 mile range and fast charging 250 miles in 10 minutes. CATL supplies most of today’s market with entry level batteries with 267 mile range, Tesla and Toyota are two of their customers. This new battery is being introduced first in China, likely to fully test it before entering the world market. While I don’t know their pricing and cost, it is likely their goal to both grow the market and increase market share for entry level and mid-level EVs. If, in two years, this replaces their current product at the same price, consumers will be able to drive for 400 miles, add 250 miles in one 10 minute charge and complete a 600 mile trip. In my opinion, these specifications will satisfy 90% of the consumer market. So very little range anxiety will be left in the USA.
Or, if you cut the battery size and price roughly in half and place it in low cost entry level products like a 25,000 EV, the lowest end of the market will, no doubt, embrace the high speed charging performance and embrace the 250 mile range at a very low cost. The ball park estimate is batteries are now 30% of the EV cost, so for a 25,000 car the battery cost is $7500. Reduce this in half and the EV drops to $21,250.
Three more battery examples, two are in production and one is in Toyota’s dreams.
In 2023, Lyten, a Si valley company, began production of a Li Sulfur battery with a unique carbon structure. The battery has more than twice the energy density of the best Si ion battery. It is being purchased for military use cases initially but also is being sampled by the auto Industry. Will this become part of the EV industry? Most likely it will take a few years. Maybe by 2027. If it does 800 mile range or entry level batteries with ¼ today cost are possible.
More on Lyten from Bing AI:
https://sl.bing.net/eAXbnr7ZmDs
Of the new designs entering production in 2023, Lyten is most likely to be first to the EV market. Solid state batteries have been a struggle for years by many teams and high density Si anodes also face fundamental challenges even with modest Si added. That said Amprius, in production now, and Toyota also claim 2X power density within 3 years.
Amprius, also a Si valley company, began production in 2023 of a battery with high density silicon on the anode. Si is used in several batteries to increase energy density but the Amprius solution has the highest density. It also offers 2X the energy density of the current best in the industry. Testing in the EV industry is now in progress.
In 2023, Toyota announced they have a solid state battery in development that is less expensive and will support 800 mile range or more. Is this real? Maybe, we won’t know until at least 2027.
The CATL battery is, my guess, 95% certain to become mass produced for EV’s. The other three, in my opinion, are inching closer to zero range anxiety product but still face development to reach mass production for the EV market.
By 2026, range anxiety will be rare because of improved charging infrastructure, consumer knowledge and new battery technology with higher range and charging speed and lower price points. Also, by 2026 there will be enough vehicle types to cover most consumer and commercial needs.
Predictions for gas to EV transition.
Fossil fuel consumption by light vehicles will decline by 50% by 2033. That’s my prediction based mostly on commercial application of light vehicles and consumers who use a lot of fossil fuel. The commercial conversion from gas to EV is already in process with use cases like police cars, uber, Van for last mile delivery (Amazon, UPS, Post office…), federal, state and local governments using EVs for utility vehicles.
For commercial applications if the EV is less expensive and matches work requirements for configurations, near 100% will convert to EV. By 2026 the vehicle types will cover 90%+ of the market. The only missing segment is for higher power density where the work requirement requires light vehicle trucks to move heavy loads over more than 100 miles a day (about 10% of the market for trucks). This may be met by 2027 with new high density battery technology. The infrastructure for fast charging is, in my opinion, only a small need in this segment as most needs are met with overnight charging. Very few cases need more than 125 miles a day, almost none need long trips.
About 20% of vehicles use 50% of the fossil fuel consumed, about 56 million vehicles. Some already converted to EV. Assume 5 million/year on average convert from gas to EV from 2026 to 2033 or 35 million of the highest use fossil fuel vehicles convert to EV. So about a 32% reduction in fossil fuel.
The other 18% fossil fuel reduction comes from all the rest of vehicles converting from gas to EV. These range from low mile to high miles per year and from low to high MPG. Regardless, if the EV range, fast charging, public charging and cost is continuously improving by 2026, the consumer consideration for EV will grow, perhaps to 80% of the market.
This is growth in consumer interest just with the new CATL battery offering low cost 425 mile range with 250 mile charging in 10 minutes. Or like improvements from other vendors. Most vendors of high speed public chargers have agreed to support the Tesla plug standard and higher quality / high % of working units on line. So bye bye range anxiety.
The industry already offers 500 mile range in very expensive $100,000 + vehicles. Toyota’s plan for solid state batteries with 600 or 800 mile range likely will be initially expensive. A new battery technology available for 800 mile range in 2027 or 2030 likely will not increase general consumer interest in EV already generated by 2026.
However, there is a need for high density batteries for trucks. Higher power density for both light trucks towing heavy loads and for heavy trucks like semi-trucks is needed. Tesla and other vendors are offering EV semi-trucks today. Tesla Semi-trucks offers the highest range at full load of 500 miles, most of the other vendors are at 100 to 200 miles. By the way most semi-trucks only run 200 miles a day (last mile delivery, port of entry to warehouses…)
Diesel fuel reduction will likely be slower than gas for light vehicles. The retirement rate for heavy trucks is slower than light vehicles. They are built for a long life. The expected life of a diesel engine for semi-trucks is 1,000,000 miles. These applications are 100% driven by cost. Even if 100% of new heavy truck purchases are EV, the time to reach 50% reduction in diesel fuel is likely around 2040. Trucks represent about 50% of fossil fuel consumption but only 4% of vehicles on the road. Too early to tell if higher power density batteries are needed to cover more than 50% of the market and when the price premium for EV will win 100% of cost analysis cases for diesel fuel after comparing to EV lower fuel and maintenance costs.
What happens when fossil fuel consumption declines by 50% in the US?
Some refineries will close and or shift away from gas and diesel production.
Some gas stations will close. There won’t be as many folks getting gas and buying treats or lunch. Some stations might add fast charging, but only about 5% of the time EV drivers will need to purchase fuel in the public square, 95% of the time they will charge at home or work.
It is possible that when gas stations begin to close consumers will start to worry about the long-term support for gas cars. Will range anxiety for EVs shifts to anxiety for gas station access?
50% decline in fossil fuel consumption means less oil profit for Russian and Middle East terrorists. US fuel supply will be more stable, so fewer fuel price shocks and more stable economy. Fewer Middle East wars over oil. In short, the US will be safer and more secure economically.
What happens to the oil industry in the US. Of course, this is hard to predict as oil is used for more than gas and diesel. Also, the international demand for oil is likely to allow for more export. US oil could well keep world oil prices lower. But the industry could also decide to milk the declining market. TBD.
How many oil jobs will be lost once US fossil fuel consumption declines by 50%? From Bing AI:
The oil and natural gas industry in the US employs around 10.3 million people12. The industry supports 9.8 million jobs or 5.6 percent of total U.S. employment3.
Given that gas and diesel only consume 50% of oil, if US fossil fuel consumption declines by 50%, I would ball park the loss of jobs at about 1 million.
What is your ball guess for when gas will decline by 50%, when diesel will decline by 50%? Do you think that 2026 will be an EV over gas inflection point?
By the way, there are several teams working on batteries with 4X and even 8X the power density of today’s battery. Li air is one example, it has the potential of matching the energy density of gas. The continuous improvement in Si anodes, the new Lyten design evolution and solid state batteries all have the potential of significant power density improvements. The motivation for higher density is more for air plane use or powering ships and heavy trucks and tanks. For light vehicles they will likely offer a path to lower weight and lower cost batteries.
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