Why Tesla doesn’t scare the fracking industry

Midland, Texas, home of the boom in US oil and natural gas production, is more than 300 miles from the nearest Tesla store, but it feels even farther away: The projected growth in electric vehicle sales doesn’t worry industry leaders.

“We use about 100 million barrels of oil in the world a day,” said Scott Sheffield, CEO of Pioneer Natural Resources, one of the largest players in the oil and gas field known as the Permian Basin. “Roughly 25 million of that is used for gasoline automobiles. If we convert all 25 million barrels a day overnight to electric vehicles, we’re still going to need a lot of hydrocarbons.”

By 2040 more than half of new car sales will be electric vehicles, according to forecasts. But it will take a much longer time before they make up half of cars on the road, as gasoline powered cars slowly wear out and are scrapped.

Much of the world’s expanding population is in parts of the world where electric vehicles will have trouble taking hold, Sheffield said.

“In Africa, where a lot of that growth is, they can’t go immediately to electric vehicles. They just don’t have the infrastructure. It will take a long time for EVs to replace the gasoline engine in my opinion,” he said.

Beyond that, much of the electricity that will be used to recharge electric vehicles in the future will come from natural gas being produced by the US industry.

“In the Permian, 40% of our production is natural gas,” said Sheffield. “Natural gas will continue to capture [electricity generation] market share.”

Much of the growth of natural gas used to generate electricity is due to fracking, which has driven down the cost of gas.

Sheffield’s lack of concern about the growth of electric vehicles is echoed by others in the industry.

“When folks talk about energy transitions, these are significant shifts that will take a long period of time,” said Frank Macchiarola, vice president of downstream and industry operations at the American Petroleum Institute, the trade group for both the oil and natural gas industries.

Macchiarola questions whether electric vehicle adoption will take place at the pace of some of the current forecasts. And he agrees that much of the electricity that will be used to charge any electric vehicles will come from natural gas.

“Based on independent analysis, two things are clear,” he said. “One: Natural gas will be a significant source of power generation in the United States. Two: Oil will continue to be used a primary source of transportation fuel,” he said.

Figures from the US Energy Information Agency back that up.

So far in 2019, nearly 38% of US electricity is generated using natural gas, a record high, and more than any other fuel. That’s up 14 percentage points from 10 years ago. Renewable energy sources — wind, solar and hydroelectric — also is producing more electricity. But those sources together only amount to 17% of the market, up only 8 percentage points in the same 10 year span.

That growth of electricity generated by natural gas is expected to continue to grow, even if electricity from renewable energy expands at a faster clip in coming decades. The latest projections from the EIA show the amount of electricity produced by natural gas is to increase by 64% overall between 2017 and 2050.

It’s easier to see sources of renewable energy around Midland than it is to see Teslas or other electric vehicles. Here in the heart of the oil patch, giant wind turbines are common. Texas is by far the largest producers of wind energy in the country, responsible for nearly 30% of the wind-generated electricity. That’s more than is produced by any other region of the country.

Even with the growing use of wind and other renewable energy, natural gas should be the primary source of US electricity for decades to come, according to EIA.