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  • The world is running out of oil.

  • At least that was the idea behind the "peak oil" hypothesis

  • that dominated economic thinking for decades.

  • But it turns out that with fracking,

  • deep-water drilling, and oil sands, there's a lot more oil in the world than we once thought.

  • The old "peak oil" theory ain't happening.

  • But what if instead of running out of oil we just stopped buying the stuff?

  • Most oilmen scoff at the idea.

  • There are one billion gas guzzling cars on the road worldwide today,

  • and only one tenth of one percent of them have a plug.

  • OPEC contends that even in the year 2040, EVs will make up just one percent.

  • But don't be so sure.

  • Consider the "S Curve.”

  • S Curves are used to describe the spread of new technologies over time,

  • like early refrigerators and color TVs.

  • Growth starts off slowly at first,

  • and then when the product really starts to connect with everyday people. We have liftoff.

  • Eventually the market gets saturated and growth tapers off, forming the top of the "S".

  • Predicting the S Curve for electric cars is extremely difficult, because we're making

  • assumptions about demand for a type of vehicle that doesn't even exist yet:

  • fast, affordable, and spacious cars that have an electric range of at least 2 to 3 hundred miles.

  • But here's what we know: In the next few years Tesla, Nissan and Chevy plan to start

  • selling long-range electric cars in the $30,000 range. And other carmakers and tech companies

  • are investing billions on dozens of new models due out in the next four years.

  • By 2020, some of these will be faster, safer, cheaper, and more convenient than their gasoline counterparts.

  • That sure seems like the point when the S curve goes vertical.

  • To start an oil crash, you don't need to replace all of the cars on the road today.

  • You just need to reduce demand enough to cause a glut of unwanted oil.

  • Consider the oil crash that started in 2014. That was caused by too much supply,

  • when producers started pumping out an extra 2 million barrels a day.

  • So when electric vehicles are able to displace that much on the demand side, it should also

  • cause a crash. When might that happen?

  • Tesla is building factories to go from about 50,000 sales last year to 500,000 in 2020.

  • Let's assume for a minute that Tesla can meet its own forecasts. And let's assume

  • that other carmakers maintain their current combined market share for plugins.

  • If each electric vehicle displaces about 15 barrels a year, here's the

  • impact on oil from all the EVs worldwide. At this rate we hit our benchmark of 2 million

  • barrels of oil a day displaced as early as 2023. That's an oil crisis. And the thing

  • is, it's just the beginning. It's not at all unreasonable to assume that by 2040

  • nearly half of the world's new cars will have a plug.

  • Sure you're skeptical. The price of electric cars still needs to come down, there aren't

  • yet enough fast charging stations for convenient long-distance road trips.

  • Many new drivers in developing countries like China and India will still choose gasoline and diesel.

  • But imagine a future when the rumbling streets of New York and New Delhi suddenly fall

  • silent with electric engines. What if global demand for oil starts to fallat first by

  • a trickle, but then in a rush. Trillions invested in oil will be lost, while trillions in new

  • energy will be won. The power of nations will be shuffled.

  • That's the promise of the new peak oil, and it may be coming sooner than you think.

The world is running out of oil.

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