Big Oil and the new $35k Tesla–Musk better roll up his sleeves

Photo Courtesy MotorTrend

Last week CNET posted an article mentioning the announcement of new $35,000 Tesla, aptly named the Model 3.

The new ride estimated to debut in 2017 will hang on the ability to make a cheaper battery. CEO of Telsa, Elon Musk, claims the biggest factor in making a more affordable, high-volume-production electric car is battery making capacity. Right now, such capacity does not exist to manufacture Tesla’s on a level equal to that of traditional gas-powered vehicles. But when the ability does exist, Tesla is promising us it will be game on.

That’s when Big Oil just might start feeling their mortality.

As the Oil Industry continues to rake in trillions, many of us know, that the real future exists in alternative energy.

Though sales projections on oil consumption gathered and presented by Big Oil claim sales will continue to rise, other research shows that such estimates are inaccurate. Big Oil argues that countries beginning to develop into industrial nations will makeup the majority of the increase as they burn more gas to fuel their economic needs. However, with climate change at the forefront of the world’s problems and environmental standards becoming more stringent, these countries are not likely to consume as recklessly as the world once did despite their growing need for fuel.

This combined with the mounting problem of extracting oil in hostile territories (both politically and geographically) at a high cost is sure to create profit woes for Big Oil. According to The Economist, “Half the supermajors’ long-term capital spending now goes on costly unconventional or deep-water oilfields, largely because production-sharing arrangements and licenses to drill in the NOCs’ backyards are increasingly hard to find. The big NOCs now make up six of the ten largest oil producers in the world.”

As a result, oil companies have turned to shale for supplemental revenue, though such an investment can be seen as counterproductive to their central business model–oil. The Economist reports that both Shell and Exxon are achieving more than 40% of their energy production from gas. However, with a potential gas surplus on the horizon being predicted by economists, natural gas prices could fall below that of oil, thus providing far less benefit and more headache to Big Oil’s plans, especially with gas’ high extraction costs.

The Model 3 Tesla could very well be a sign of Big Oil’s impending doom. If Tesla can manage to create an affordable, yet high-powered lithium-ion battery through its relationship with Panasonic and it’s gigafactory idea (yet to be actualized) it could bring volume production of electric automobiles onto the playing field with traditional automakers.

Tesla could change the game.