Will the Growth of Electric Vehicles Disrupt Oil Markets?
The growth of battery-powered cars could be as disruptive to the oil market as the OPEC market-share war that triggered the price crash of 2014, potentially eliminating hundreds of billions of dollars from the value of fossil fuel producers in the next decade.
About 2 million barrels a day of oil demand could be displaced by electric vehicles by 2025, equivalent in size to the oversupply that triggered the biggest oil industry downturn in a generation over the past three years, according to recently published research from Imperial College London and the Carbon Tracker Initiative, a think tank. A similar 10% loss of market share caused the collapse of the U.S. coal mining industry and wiped more than a $108 billion off the value of European utilities from 2008 to 2013, the report said.
Major oil companies are waking up to the potential disruption plug-in vehicles could have on their industry. BP Plc says electric vehicles (EVs) could erase as much as 5 million barrels a day in the next 20 years, while analysts at Wood Mackenzie say they could erode as much as 10% of global gasoline demand over that time. Global oil demand could peak in as little as five years, according to Royal Dutch Shell Plc Chief Financial Officer Simon Henry.
By 2040 16 million barrels a day of oil demand could be displaced, rising to 25 million by 2050, a “stark contrast to the continuous growth in oil demand expected by industry,” according to the report. The impact on the oil industry could exceed the price slump of 2014 to 2016 that “wiped hundreds of billions off capital expenditures,” Stefano Ambrogi, a spokesman for the Carbon Tracker Institute, said by e-mail.
The cost of EVs is already falling faster than previously forecasted and they could reach parity with conventional internal combustion vehicles by 2020, eventually saturating the passenger vehicle market by 2050, the report said. This comes as the electric car market grows steadily. EV makers have continued to make technological improvements successfully driving down costs, and uptake rates globally have been on the rise.
Tighter emissions rules in China and Europe leave global carmakers and some consumers with little choice but to embrace plug-in vehicles, fueling an investment surge, according to industry executives recently gathered in Detroit for the city’s annual auto show. “Car electrification is an irreversible trend,” said Jacques Aschenbroich, Chief Executive of auto supplier Valeo, which has expanded sales by 50% in five years with a focus on electric, hybrid, connected, and self-driving cars. In Europe, green cars benefit increasingly from subsidies, tax breaks, and other perks, while combustion engines face mounting penalties including driving and parking restrictions. China, struggling with catastrophic pollution levels in major cities, is aggressively pushing plug-in vehicles.
In the U.S., Ford is moving forward with previously announced plans to invest $4.5 billion in plug-in vehicles by 2020, according to Chief Executive Mark Fields. “The industry is changing, the infrastructure’s starting to build, and that’s why our view is that within the next 15 years we’ll see more electrified offerings than we’ll see gasoline-powered,” Fields said as he unveiled a $700 million plan to build a battery SUV and other plug-in vehicles in Flat Rock, Michigan. EVs may take 19% to 21% of the road transport market by 2035, according to the researchers. That is three times BP’s projection of 6% market share in 2035. By 2050, EVs would comprise 69% of the road-transport market, with oil-powered cars accounting for about 13%.
Citations
- http://bloom.bg/2jXG7bH Bloomberg
- http://for.tn/2kfq11g – Fortune
Gander Mountain: Latest Victim Among Sporting Goods Retailers
U.S. hunting and fishing chain Gander Mountain Co is preparing to file for bankruptcy as early as this month, after an aggressive effort to expand its store base failed to pull in new customers, according to sources familiar with the situation.
The privately held company is owned by David Pratt and the Erickson family that owns Holiday Station Stores. Jay Tibbets has been president since November, after Derek Siddons left the company. Siddons, who started with Gander Mountain as a store manager in 2009, had a prodigious rise to the executive team, after being appointed president in 2015. The retailer operates 160 stores in 27 states, including several that opened in 2016 in Pennsylvania, Colorado and Texas. More than 50 stores opened in the last five years.
The company, which bills itself as America’s firearms superstore, has faced challenges capitalizing on a booming gun market. The Federal Bureau of Investigation carried out a record 27.5 million background checks on people seeking to buy guns in 2016, up 19% from the year before. Gander also has stiff competition from rivals like Bass Pro Shops and Cabela’s Inc., which have been revamping their stores to attract customers with restaurants and shooting activities.
Bass Pro agreed last year to buy Cabela’s for $5.5 billion, potentially putting more pressure on Gander Mountain, though the deal has to overcome major hurdles to close, including antitrust concerns. But most outdoor/sporting goods retailers have struggled of late. Eastern Outfitters, owned by Eastern Mountain Sports, filed for bankruptcy recently. Sports Authority also declared bankruptcy and closed 300 stores last year.
Gander Mountain now confronts financial trouble after its aggressive expansion across the United States. The company has a $30 million loan and revolving credit lines for $25 million and $500 million, according to Thomson Reuters data. It is not clear how much money in the credit lines Gander Mountain has yet to draw down.
In addition to a challenging competitive landscape, the company may have also been hurt by its generous return policies. Like Maine-based L.L. Bean, Gander Mountain offers a lifetime guarantee on its products. The Associated Press reported recently that L.L. Bean may alter that policy in a bid to cut back on what the AP termed “fraudulent returns.”
Gander Mountain wanted to address some of its challenges by exploring a sale last year of its online and catalog boating business called Overton’s, but was unable to find a buyer at agreeable terms. The firm is currently working with financial advisory firm Lighthouse Management Group and the Fredrikson and Byron law firm.
Citations
- http://reut.rs/2kY4fi6 – Reuters
- http://strib.mn/2kiOJJ9 – MinneapolisStar-Tribune
The Good News Is . . .
- Total mortgage application volume rose 2.3% on a seasonally adjusted basis for the week, according to the Mortgage Bankers Association. Mortgage applications to refinance home loans increased 2%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,000 or less) decreased to 4.35% from 4.39%, with points remaining unchanged at 0.34 (including the origination fee) for 80% loan-to-value-ratio loans. Mortgage applications to purchase a home, which are less sensitive to weekly rate moves, also rose 2% for the week and are 3.6% higher than a year ago.
- Tenneco Inc., a leading designer, manufacturer and marketer of clean air and ride performance products and systems for automotive markets, reported earnings of $1.67 per share, an increase of 20.1% over year-earlier earnings of $1.39 per share. The firm’s earnings topped the consensus estimate of analysts by $0.23. The company reported revenues of $8.8 billion, an increase of 7.0%. Management attributed the results to strength in its light vehicle and commercial truck business segments.
- The British consumer goods company Reckitt Benckiser, which makes Air Wick fresheners, said on Friday that it had agreed to buy Mead Johnson Nutrition, the maker of Enfamil baby formula, in a $16.6 billion deal that would significantly expand its sales in developing countries. The combined company would have about 40% of its sales in developing markets, and China would be its second-largest market after the United States. The British company derives about 80% of its revenue from its so-called power brands, and the deal would add the well-known Enfamil label to its stable of products. Under the terms of the deal, Reckitt Benckiser would pay $90 a share for Mead Johnson.
Citations
- http://bit.ly/2kV0yY6 – Mortgage Bankers Association
- http://cnb.cx/2lwnm3s – CNBC
- http://bit.ly/2kFk4ZX – Tenneco Inc
- http://nyti.ms/2kFfDi2 – NY Times Dealbook
Planning Tips
Guide to Setting Up a Financial Surrogate
Planning for the transition of our financial caretaking is one more aspect of preparing for old age that most are reluctant to even think about. Yet without it, we must eventually accept options imposed on us by family or the court. This planning is crucial in order to take care of yourself and your finances in the ways you choose. Below are some tips for transitioning your finances to your selected financial surrogate. Be sure to consult with your financial advisor to carefully select your surrogate and design your transition plan.
Simplify Your Finances – A good first step is to simplify your finances. For example, consolidate checking, savings, and retirement accounts. Reduce check-writing by using credit cards wherever possible and paying off the balances every month. Reduce credit cards to three: one to use in public, one for automatic bill-paying and one for online purchases. Not only does this simplify record-keeping, but it minimizes the disruption when one is stolen.
Inform Your Financial Surrogate About All Assets – Your surrogate needs to know about all your assets. Not only does this include common liquid assets like bank accounts and securities held in taxable and retirement accounts, it also means more obscure liquid assets. Some examples include variable and fixed annuities, structured notes, collectibles, mineral rights, and cash-value life insurance.
Provide Access to Financial Accounts and Records – It is helpful to have the person who will take control of your finances begin by periodically monitoring your accounts. This will require them to have access to your financial records. If your affairs are relatively simple and your surrogate is local, you can authorize them to access your accounts and receive statements. Another good way to share information, especially if your surrogate lives far away, is through a secure online access site where you can share relevant and up-to-date information. Almost every financial planner offers a “client portal,” and so do popular sites like Dropbox and Sharefile.
Have Your Financial Surrogate Observe Monthly Financial Activities – Have your surrogate start with just observing the monthly financial activities. This can mean receiving duplicates of the bills or periodically logging into investment sites. Alerts could be set on various accounts if spending exceeds a certain limit. There are several money management sites—like quicken.com and mint.com—that can also give a surrogate online access to monthly statements and spending alerts.
Have Your Financial Surrogate Participate in Annual Meetings – The activity of your surrogate can eventually be increased to attending annual meetings with your insurance agent, investment advisor, attorney, and accountant. If you have a financial advisor, it would be helpful to bring your surrogate into your quarterly or annual updates. This way the surrogate can begin to build a relationship with the advisor, which will greatly smooth the transition to the surrogate working with the advisor in making your investment decisions. The surrogate can gradually begin to assist with the monthly bill-paying. Eventually, this would culminate in the person taking over all financial decision-making and responsibilities like purchases, bill paying, taxes, and investment decisions.
Citations
- http://ti.me/1JxkF8l – Time
- http://bit.ly/1ewvLcx – Nolo.com
- http://bit.ly/2kxBqpm – Investopedia
- http://nyti.ms/2kiRTg1 – NY Times
- http://bit.ly/2kfwTvt – AgingCare.com
