How electric cars could smash BP plc and Royal Dutch Shell plc

Electric cars could run a coach and horses through the long-term investment case for BP plc (LON: BP) and Royal Dutch Shell plc (LON: RDSB), says Harvey Jones.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Investors in UK-listed oil giants BP (LSE: BP) and Royal Dutch Shell (LSE: RDSB) have been paying close attention to the oil price because they know that unless it climbs higher, their juicy 7%-plus dividend yields will be in jeopardy. However, they need to look to more distant horizons, because even if the oil price does climb a little higher this year, the long-term outlook is mixed.

Golden years

I’ve always thought ‘black gold’ to be a rather daft a description for oil, given that gold has few practical uses but the global economy runs on crude. However, that may not always be the case, due to the rise of electric vehicles and renewable energy. A new report from the World Energy Council suggests these two trends could hit demand for oil sooner and harder than expected. Oil consumption could actually start falling within the next 10 to 15 years and if correct, this would play havoc with the investment case for BP and Shell.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Renewable energy has its critics but few disagree that it’s getting rapidly cheaper. Bloomberg New Energy Finance (BNEF) says that solar energy costs have fallen 80% since 2008 and are set to fall another 60% to average $40/MWh by 2040. Wind energy costs are set to fall another 40% from here.

Our friends electric

Electric cars also have their critics but the bandwagon is finally starting to roll. The number of plug-in electric cars on the world’s highways is set to pass 2m by the end of this year, as the Nissan Leaf and Tesla Model S make inroads. Norway and the Netherlands plan to phase out all fossil fuel cars by 2025. Even in the laggardly UK, electric car sales will overtake internal combustion engines by 2027, according to Go Ultra Low. The shift could go even faster than that, if a new, affordable electric car grabs the public imagination. Maybe next year’s Tesla Model 3, aimed squarely at the mass-market will be the one.

BP and Shell have seen much of this coming, and have shifted their focus to natural gas. This looks a wise move, with the World Energy Council forecasting continuing growth in this sector. However, tighter limits on carbon emissions or even cheaper renewables could wreck their get-out plan. BNEF forecasts that renewables will be cheaper than both gas and coal by 2027.

Of stones and oil

Anybody who tries to predict the future of the oil market should remember the short-lived panic over “peak oil”, which was supposed to see the world running out of the black stuff. Former Saudi oil minister Sheikh Yamani made a slightly better call 16 years ago when he said that by 2030 there will be a huge amount of oil but no buyers: “The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.

That day is unlikely to arrive as soon as 2030, with the world still consuming 97m barrels of oil per day. However, the clock is ticking, and BP and Shell could be in for a rude (or should that be crude?) awakening. 

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended BP and Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Satellite on planet background
Investing Articles

£3.3bn raid sends the Vodafone share price up. Here’s what I’d do

The Vodafone (LON:VOD) share price opened higher on Monday, as news of a big buy from a major investor was…

Read more »

Happy woman with excess weight smiling and dancing alone in sports clothes
Investing Articles

Top British growth stocks for May

We asked our freelance writers to share the top growth stocks they’d buy in May, which included miners and musical…

Read more »

Electric cars charging at a charging station
Investing Articles

A cheap UK share I’d buy for the electric vehicle revolution

This cheap UK share has collapsed in value since I bought last year. But here's why I'm thinking of buying…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

3 distressed stocks with huge potential that I’m considering for my portfolio!

These three distressed stocks have performed badly in 2022, but that doesn't mean they won't recover. Here's why I'm considering…

Read more »

Luxury inside of NIO car
Investing Articles

Here’s why I’ve just bought NIO shares!

I've recently bought NIO shares, despite the stock being down nearly 80% over the past year. Here's why!

Read more »

Mature people enjoying time together during road trip
Investing Articles

Is now the time to buy Tesla shares?

Tesla's share price has fallen in 2022 and so has its valuation. Edward Sheldon looks at whether this is a…

Read more »

A graph made of neon tubes in a room
Investing Articles

Are Woodbois shares worth me buying at 4.7p?

Jon Smith considers the recent surge in price for Woodbois shares, and wonders if the move lower last week represents…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How I’d generate a passive income for life with just £20 a week

Dividend shares can be an excellent way to earn a passive income for life. Our writer discusses a plan to…

Read more »