When Bean, the world’s largest automaker, and OPEC’s top brass agree on something, the rest of us should sit up and take notice.
Rowan Atkinson made headlines last week when the Green Alliance pressure group accused him of harming the uptake of electric cars by writing a newspaper article saying they were boring.
That was a little unfair since he was one of the first to adopt it. He had a nice little BMW i3 that a friend told me kept running out of charge.
It’s a flattering, if slightly absurd, idea that a comedy actor’s column would have such global influence. The reality is that the shift to fully electric cars has slowed not just in the UK but almost everywhere. Overall numbers continue to rise, but at a more moderate pace than expected as the downsides become clear.
So Toyota may be right in its skepticism about the acceptance rate. Its president, Akio Toyoda, said last month that the company thought pure electric cars would peak at 30 percent in the market. “The engines,” he said, “will surely remain.”
Car-nage: Mr Bean star Rowan Atkinson was accused of damaging the uptake of electric cars by writing a newspaper article saying they were boring.
So much for plans on the continent and in the UK to ban sales of new petrol and diesel cars by 2035, and a far cry from Bloomberg’s forecast that electric cars would account for 70 per cent of new car sales by 2040.
There is a similar clash of opinions about oil’s long-term prospects. The latest forecasts from OPEC, the Organization of the Petroleum Exporting Countries, raised the likely level of demand in 2045 to 116 million barrels per day, up from 102 million barrels per day last year.
By contrast, the International Energy Agency believes demand will have started to fall by the end of this decade and its long-term forecast is that it will fall to 55 million barrels per day by 2050.
What should we do with this? You could say that both Toyoda and OPEC are following their rules. It is in Toyota’s interest that internal combustion engines remain part of its range, since, although the company pioneered the development of hybrids with the ubiquitous Prius, it has been relatively slow in producing pure electric cars.
As for OPEC, the longer oil and gas maintain their dominant share of energy supply, the more time its members will have to accumulate their assets abroad and develop alternative sources of income.
On the other hand, if this view is at least half correct and the move away from oil and gas is slower than currently predicted, there will be profound consequences for all of us, not least for investment strategy.
For starters, there will be more resistance to governments using environmental arguments to advance political objectives. This is already seen in the concern about ending sales of gas boilers and stoves.
Saying this is not taking a position on the issue. For the record, we own a couple of heat pumps and we own a Prius.
This is simply to point out that if the speed of the transition from oil and gas globally turns out to be slower than their current policy anticipates, governments will have difficulty retaining popular support.
Next, we must be aware that we are no longer in a world where the West decides or even greatly influences what everyone else should do. The United States remains important and may very well remain the largest economy, despite the challenge from China. But the emerging world as a whole continues to gain ground against the so-called advanced countries.
Note that since Russia invaded Ukraine, India has joined China as its largest oil market.
When it comes to investing, there are a number of implications. For starters, a slower shift away from oil and gas helps the U.S. economy. The United States has been the world’s largest oil producer since 2018 and has been increasing its dominance. It now pumps almost a fifth of the world’s total supply.
That is by no means the only reason for the strong recovery its economy has made after the pandemic, the fastest growth of any G7 member, but it is certainly one.
It will also lead to a rethinking of ethical investing. You can understand the reasons why some funds do not want to invest in fossil fuels.
However, if that option reduces investment by Western companies in oil and gas exploration, it improves the relative position of OPEC and other non-Western suppliers.
Finally, in purely financial terms, it makes investing in Western oil companies a far better proposition. They are in a growing market, not a shrinking one, and they earn a great dividend yield.