EV Battery Tech Must Outpace Oil Industry Advances

Moderate oil prices in the U.S. will continue to inhibit the growth of BEV sales even as battery costs decline.


As the industry ramps up development of battery-electric vehicles, petroleum remains king. Oil prices are moderate in the U.S. and the industry continues to complete new wells at reasonable prices. Which means the focus is not on oil supply but meeting peak oil demand. This scenario would seem to inhibit the growth of BEV sales, and if it continues for a long period, sales could indeed be impacted, noted Trish Curtis, president and co-founder of Petronerds, a global energy-analytics firm. But it hasn’t happened yet.

Battery pack costs are projected to drop, making BEVs price-competitive with ICEs by 2020-2024, according to the Union of Concerned Scientists. (UCS)

“Despite relatively low oil and natural gas prices in recent years, electric vehicle sales have outpaced expectations,” Curtis told the audience at the 2019 SAE WCX. Total EV sales worldwide, including plug-in hybrids, surpassed two million units in 2018, continuing what has been a six-fold increase in sales since 2014. However, only 361,000 of those vehicles were sold in the U.S., she observed. Compared with 2018 sales of the Ford F-150—more than 900,000 units—the EV/PHEV market still is in its infancy.

“Technological advances in U.S. oil exploration and production have enabled incredible supply growth,” Curtis said, adding that these advances are applicable to shale oil and similar “unconventional assets” worldwide, “from Oman to Argentina.” This has created a bearish future for oil prices, and on a long-term basis this could hold back BEV market development.

BEV price penalty vs. combustion-engine vehicles could be halved with advanced production technologies, even at present $190-210 kW/h battery pack costs. (McKinsey & Co.)

“Oil technology still has room to grow,” she explained, “so battery technology must continue to make gains to lower overall (electric) vehicle costs and get more customers over the hump to make BEV purchases.” Right now, she said, the BEV has a $12,000 purchase-cost penalty. There is an obvious need to reduce battery costs and avoid issues of supply of critical materials, including lithium, and address recycling.

Battery costs, currently estimated at $190-210 kW-h, are forecast to drop to $125-150 kW-h as soon as 2020-2024, according to the Union of Concerned Scientists, at which point the BEV cost penalty could be eliminated. With deployment of cost-saving BEV production technology, even at present battery costs, the UCC sees the opportunity to cut the penalty in half. Increased production could also demonstrate that the BEV market can be profitable across most pricing ranges, something not clear at this time.

Oil well drill-to-completion costs, particularly for shale, are projected to remain competitive. (Dallas Federal Reserve)

Tax credits/subsidies have helped the BEV market by reducing purchase cost penalties. However, China is lowering BEV subsidies by 65% and Tesla’s U.S. tax credits are on a phaseout schedule. Some state subsidies continue, but overall, consumer reactions to potentially rising initial costs “will be telling,” Curtis added. There is recovery of some of that BEV extra cost, both in reduced maintenance and lower “refueling” expense, but she pointed out that ICE technology for greater fuel efficiency also is being developed.

There obviously is a growing potential market for the BEV if the cost penalty is reduced, but Curtis cited a 2016 survey of the U.S., Germany and China that also saw great needs by potential buyers for increased driving range and efficient charging infrastructure. She also noted a study by McKinsey & Co, a financial consulting company, cited by the U.S. DOT, which estimated the need for a $50 billion investment to install a national U.S. network by 2030.

Although an EV charging infrastructure is needed, even today a 410-mile rural trip is possible with a BEV, as this Petronerds map plot for a Tesla showed. (Petronerds)

Her data said that 3-6% of trips exceed 100 miles (160 km). To assess basic viability as it is today, she plotted a trip from Hill City, South Dakota, to Baggs, Wyoming, and found 16 EV charging stations en route or within a short distance off it, which would enable the 410-mile (660-km) trip to be completed in a Tesla or equivalent.

In discussions following the SAE session, some attendees noted that residents of cities, where passenger car trips tend to be shortest, also are more likely to live in apartments, and parking cars in the streets or open lots, with no place to charge. On-street chargers, some observed, could be prone to vandalism (their cords are sold for copper scrap) and may end up out of order. Simple solutions may be elusive. Further, if only some parking spaces had chargers, enforcing restrictions to BEVs could be difficult.

The BEV price penalty could be reduced by applying production technologies, even at present battery pack costs of $190-210 kW-h, Curtis asserted. Only 20% of petroleum production goes into gasoline for passenger vehicles, the rest for such currently non-replaceable uses as aircraft, trucks, ships and petrochemicals, a Saudi oil executive recently noted. The U.S. is currently the world’s largest oil producer, at 11.9 million barrels daily (MBD), followed by Russia (11.5 MBD) and Saudi Arabia (10.1 MBD).