BNP Paribas warns of death spiral for petrol

A report by global bank BNP Paribas has warned that the economics of combining renewables with electric vehicles (EV) means a bleak picture for oil.

On 5 August, it published research in which it introduced the concept of the Energy Return on Capital Invested (EROCI). By focussing on the energy return on a $100bn (£82.3bn) outlay on oil and renewables, where the energy is used specifically to power cars and other light-duty vehicles (LDVs), it found wind and solar projects together with battery EVs will produce between six and seven times more useful energy than oil at $60 (£49) per barrel for petrol-powered LDVs and three to four times more for diesel-powered ones.

It means that, if it is to remain competitive in mobility, oil must have long-term break evens of $10-$20 (£8-16) per barrel.

Mark Lewis, Global Head of Sustainability Research, said: “The economics of oil for gasoline and diesel vehicles versus wind- and solar-powered EVs are now in relentless and irreversible decline, with far-reaching implications for both policymakers and the oil majors. For the first time there is a competing energy source with a short-run marginal cost of zero, that is much cleaner environmentally and will be able to replace up to 40% of global oil demand once it has the necessary scale.”

BNP Paribas