Gas Stations Versus Charging Stations
Criag is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Perhaps oil and gas investors who have been following the growth of the electric vehicle, or EV, space might have been a little worried that the oil and gas industry would collapse by the time the EV industry starts living its dream of making the whole world go all-electric. I, on the other hand, don't believe this would be the case. Nobody wants to go out of business. Oil and gas companies can't have it as an option.
While many see the evolution of the EV space as a threat to the oil and gas space, I see it as the "right" competition that would make oil and gas companies go back to their drawing boards, and map out strategies that would ensure that they remain relevant. From such competition, oil and gas investors would benefit from an improved oil and gas space that's been forced to find a sustainable solution to global-warming and a worthy investment option in an Apple-esque EV space.
I like to think that the lack of adequate competition is one big reason our environmental issues got to the current level. According to the Union of Concerned Scientists USA, or UCSUSA, one gallon of gas burned emits about 25 pounds of carbon dioxide and other global warming gases into the atmosphere. UCSUSA also found that about 30% of America's total global warming emissions come from vehicles.
Where do the gases come from? From gas stations, of course. Where do gas stations get the gas they sell? From oil and gas companies obviously. So, I won't be wrong to say oil and gas companies contribute about 25 pounds of carbon dioxide and other global warming gases into the atmosphere for every one gallon of gas they process.
I know you want to ask how we would drive our cars without these oil and gas companies. Of course, we need them. But what they contribute to global warming wouldn’t be this much if the "right" sort of competition existed. I said "right" because there are competitors obviously. After all, there's more than one oil and gas company. But what makes it the "not-right-competition" is the fact that just about all oil and gas producers go about their businesses the same way.
Which is where charging stations come into the picture
What would make for the right competition, in my opinion, is about an equal number of gas and charging stations. And when I say charging stations, I'm talking about Electric Vehicle charging stations. About equal number of charging and gas stations means that the population of EVs on the road is not so far from the population of traditional gas engine vehicles on the road.
Now the competition
The right competition won't exactly be between charging station owners and gas station owners. It would be between an EV space that's quite successfully dealt with global warming emissions from autos and an oil and gas space that would be trying its best to remain important to our everyday life. This sort of competition would put all hands on deck to deal with the huge contribution of vehicles to global warming.
If we can get a hold of this, the oil and gas space would be out to make sure that the 25 pounds of carbon dioxide and other global warming gases that come from every gallon of gas do not go into the atmosphere anymore. The EV space, on the other hand, would be out to make sure that everything about EVs is clean – clean source of energy, clean battery management system, among others. This (the striving of each industry to maintain a clean environment) would happen because they both want to remain in business.
I've started seeing this "right" competition. Oil and gas companies have begun to sense a strong competition from the EV space. They know that if, against all odds, the EV vision (the world going all-electric-car) is achieved, they would struggle to be as important as they are at the moment. One of the results of this competition is the Carbon Capture and Storage, or CCS, strategy, which some oil and gas companies are already getting their hands dirty with.
Royal Dutch Shell (NYSE: RDS-A) is one of the oil companies that's working on CCS. Due to the heavy emission of CO2 from its Athabasca Oil Sands Project in Alberta, Canada, the company lunched the CCS project, which has the capacity of capturing over a million tons (over 2 billion pounds) of CO2 annually. Removal of this amount of CO2 is equivalent to removing about 175,000 cars from the road.
BP (NYSE: BP) is the latest company to show big interest in dealing with global warming. News emerged on June 25 that BP has part-funded an emission project at a Texas cement plant, which is in addition to its investment in Skyonic CCS project.
While Chevron (NYSE: CVX) claims on its website that it has a project for reducing the emission of green house gases, the company's CEO said something that raises my eyebrow. He said in an interview, "Our leaders have to make a decision [about combating global warming]. Do they want that to continue, or do they have a better solution for us? So it's not my call [to come up with solutions]." I'm of the opinion that Mr. Watson and Chevron at large would have a change of mind by the time the competition I'm advocating grows.
What Benefit Does CCS Present To Investors?
One thing that oil and gas investors have had to worry about over the past years is how oil companies handle their corporate responsibilities, which directly affects human lives. And this singular factor has often times determined the performance of oil and gas stocks.
You'd understand exactly what I'm talking about if you take a look at ExxonMobil's Ecuadorian lawsuit, which, in reality, has to do with how Exxon handles its corporate responsibility. Thus, with oil and gas companies showing interest in the CCS project, we can now say that they're not absolutely about oil money anymore. They now have compassion for human lives and the ecosystem at large. Such positive image would always make oil companies do well both in business and in the stock market.
In addition, the CCS project may present oil companies an extra source of revenue. Most oil companies are only funding other institutions' CCS projects at the moment. I see this as a gamble they're taking to see how the project would work out. I'm certain that if the project proves worthwhile, many oil companies would soon venture into this space.
In my opinion, they're taking this approach because of the capital intensive nature of the project. They don’t want to waste billions on what they're not sure would work out fine. In the end, however, if the initiative is successful, oil and gas companies will have the largest share of the financial benefit since they have the capital to invest into it.
EV makers, on the other hand, are also trying to up their game by trying, first, to convince everybody that EVs are the answer to reducing the contribution of autos to global warming. Tesla Motors (NASDAQ: TSLA) is leading the race in this industry with its recent announcement of a battery swap system that is aimed at making drivers more comfortable driving Tesla EVs. This is an addition to the company's supercharger system. This system is a strategic move to drive EV adoption.
These sorts of developments would only nurture the competition that I'm advocating. And as an investor, I hope you understand that increased adoption of EVs (increased sales) is a sign that this industry is investable.
Like I argued in one of my posts, Tesla is a company you want to invest in. The fact that Tesla is making efforts to improve its battery services shows that it’s committed to solving the range anxiety challenge, which has been a major roadblock to the adoption of EVs. The truth is, no EV is worth buying the most other than that which assures me that I'll get to my destination without any glitch. This assurance is what Tesla has been giving to consumers. And with this development, in addition to the ones it already has in place, I project that Tesla's sales will reach a new landmark by the year.
My Foolish Take
For investors that are a little skeptical about the idea of a gas station versus charging station competition, I'd like to remind you of the revolution in the PC space, where it used to be all about Microsoft. Then, we were not enjoying our gadgets as we do today because the right competition didn't exist. But then, Apple came and everything changed. At that point, Microsoft realized that if it wanted to remain at the top, where it has always been, there needs to be a change. That competition didn't push Microsoft out of business; it only made it stronger.
In the same stead, a gas station versus charging station competition won’t push oil and gas companies out of business. And down the chain would be investors who would enjoy the benefits from cleaner oil and gas operations and a fully-grown EV space.
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Criag Adeyanju has no position in any stocks mentioned. The Motley Fool recommends Chevron and Tesla Motors . The Motley Fool owns shares of Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!