Traditional oil producers could lose the grip over auto sector image

The big oil producers have traditionally held a firm grip on the automotive industry, since they produce the fuel needed for all automobiles. Well, the latter part was mostly valid just a decade ago.

But, without anyone noticing it, even as the global oil glut has rekindled fondness for vehicles that consume more fuel, the oil industry is losing control of the automotive sector thanks to the surge in clean energy. For example, numerous analysts are debating the idea that excess supply is the only reason global fuel prices have dropped at $50 a barrel for crude oil. While in certain regions – where end consumer prices are less influenced by tax (the US, for example) – SUVs and trucks are kings once more, the truth is that globally more fuel-efficient and thus low-pollution autos are soaring in demand, further breaking the chain between the oil producers and owning a car. The end result could be simple and revolutionary – the future might look a lot different than what oil producers seek. “We have cheap oil, cheap gas, cheap renewables. You do have an abundance of supply in a way you haven’t had for decades. We also are in an age of competition,” comments Michael Liebreich, the founder of Bloomberg New Energy Finance.

According to statistics, while oil consumption has remained essentially level over the past ten years, production has surged as new methods – such as fracking – have been introduced. One of the most important explanations behind the flat demand is actually boring: efficiency. With governments all around the world fighting global climate change, tougher and tougher mileage and emissions standards are being imposed, so automakers are producing the most efficient cars, SUVs and trucks ever.

Via Bloomberg