Oil Companies’ Skepticism on EVs: A Costly Gamble?

So word is that two oil giants are among the skeptics about widespread adoption of electric vehicles.

BP expects EVs and plug-in hybrids to make up 4 percent of the global vehicle fleet by 2030, while Exxon Mobil projects EVs, PHEVs and natural gas vehicles to compose 5 percent of the fleet by 2040 (plus large hybrid growth), according to Reuters. Royal Dutch Shell breaks with those predictions, seeing 40 percent of the world’s autos being electric by 2050.

As Reuters notes, the predictions drive “tens of billions of dollars in long-term investment in oil production and refining.” These decisions are being made at a time when oil companies are hugely profitable and are, in fact, investing in clean technologies to ensure that they are energy companies positioned to cash in on a changing landscape.

As they consider where and how much to invest, oil executives might do well to ponder Kodak’s fate in an age when technological advances can wipe out even the most profitable, entrenched business within a generation. Kodak filed for bankruptcy protection last month, its iconic business, as deeply a part of the American culture as the car and the filling station, decimated by digital photography. A Kodak study in 1981, Forbes reports in this assessment of the company’s decline, concluded that adoption of digital photography—actually invented by Kodak—would be minimal and non-threatening for a time, giving the company a 10-year window to adapt.

Of course it didn’t. Case studies reveal that executives, while they recognized potential for digital technology, simply could not believe their vastly profitable film business would be overtaken and could not bring themselves to make revolutionary changes in their company.

Kodak was highly profitable at the time. Here’s the Kodak moment that oil companies and EV supporters need to capture: We must take the long view and act on it.

Yes, oil will play the dominant role in the near- to midterm future of transportation. It’s a system built over a century that has led to the U.S. spending roughly a billion dollars a day on oil for transportation, plus $1.5 trillion a year in indirect economic costs, and facing uncalculated health and environmental impacts.

It leaves us vulnerable to the insecurity of Iran and other oil suppliers. BP, in fact, acknowledges this in its 2030 oil outlook, projecting that OPEC’s importance to the world oil market will grow. It adds this terrific argument for buying an EV: “Iraq is expected to account for 20 percent of global supply growth from 2010 to 2030.”

RMI’s vision and the nation’s need are to begin work now on long-term change. “This isn’t just a dream,” says RMI’s Reinventing Fire book, outlining an oil-free U.S. economy by 2050, to which the oil reduction and electricity storage capability of EVs made of ultralight advanced materials is key. “It’s a clear pathway that requires no technological miracles, only continued development and adoption of innovations already well under way.”

Progress, indeed, is occurring. California last month passed Advanced Clean Car rules aimed at putting 1.4 million plug-in hybrids and zero-emission vehicles on that state’s roads by 2025. The University of Michigan’s Center for Automotive Research just announced a new vehicle lightweighting coalition involving aluminum and plastics industries and several auto suppliers.

Ford will introduce its Focus EV this year, part of the automaker’s strategy of being ready for whichever fueling technology comes next for autos. Do we really believe, with the billions spent on research, and concern about security, pollution and climate change, that autos will change only incrementally in the next 20 to 30 years? Or does common sense tell us that a disruptive transportation technology will break cost barriers, win wide adoption and result in huge profits?

Wise business leaders, at oil companies and in other industries, will anticipate the change that is expected by many governments around the world. Failure to capture opportunities presented by the blooming industries of the 21st century will not only result in more Kodaks, it will threaten our economic growth, put us further behind in the clean energy race, and squander our fortune.