Tanker Market: Electrifying Demand
Twenty years, the investment timeline to consider when ordering a new tanker, is a long time in any industry, not least in the rapidly evolving energy markets and the drive for cleaner fuels, says Gibson tanker report.
Whilst, the collapse in oil prices in recent years may have taken the shine off many cleaner sources of energy (at least from a cost perspective) other pressures, mainly environmental, are likely to continue to influence energy consumption.
In our industry, changes to bunker specifications will influence the type of fuels consumed, whilst more economical designs will see the average fuel consumed per ship fall. The same is true across many sectors, not least automotive where continuous gains in battery technology is seeing electric cars becoming increasingly feasible.
The impact of these developments may not be felt over the next 5 years, perhaps even longer. However, if you were to order a tanker today for delivery in 2019 with a 20 year trading life, it would not be inconceivable to feel some impact from hydrocarbon alternatives later on in a vessels life.
Forecasting 25 years forward is problematic, with changing fundamentals, unforeseen events, political shifts and technological advances all having a profound impact. Some sectors are expected to see continued growth over the next 25 years (e.g. chemicals); whereas, some transportation fuels, in particular for the automotive sector, could be threatened by 2040 as electric and hybrid vehicles grow in popularity.
The question comes down to when the tanker market will start to feel the impact of booming electric cars market. Bloomberg New Energy Finance predicts that by 2040, 35% of new car sales will be electric, displacing 13 million b/d in oil demand.
Some have argued it’s too aggressive, others not aggressive enough and could be accelerated with just a few technological breakthroughs. In the shorter term, Bloomberg predicts that somewhere between 2023 and 2028, the growth in electric vehicles will displace 2 million b/d of oil demand.
However, such forecasts are incredibly sensitive to numerous factors, including political pressures, consumer trends, technological advancement and economic developments.
In contrast, the IEA’s 2015 World Energy Outlook forecasts that whilst gasoline demand growth might stall by 2030, overall oil demand for transportation fuels (in particular jet fuel which lacks a viable alternative) and petrochemicals would grow by 16 million b/d by 2040, largely offsetting declines elsewhere.
So are electric cars a threat to a 20-year tanker investment timeline? It remains hard to say; however, it seems almost certain that eventually electric cars are likely to become disruptive forces in the oil markets, although many challenges need to be overcome first.
