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Concerns Over Soaring Electricity Prices Hinted At in Elon Musk’s Oil and Gas Remarks, Strategist Says

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Published: September 9, 2022
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Tesla CEO Elon Musk speaks with presenter Xenia Wicket at the Offshore Northern Seas 2022 (ONS) conference in Stavanger, Norway on Aug. 29, 2022. Musk had commented during the conference that the world needs to rely on more oil and gas to sustain energy development, in light of Europe’s energy crisis. One strategist suggests that Musk’s words were reflecting on the dire effects on EV sales. (Image: Carina Johansen/NTB/AFP via Getty Images)

Elon Musk’s recent comments about how the world needs to continue to rely on oil and gas, as a transition to renewables stumbles, reveals a broader concern that the soaring cost of electricity may hinder the uptake of electric vehicles (EV).

“The cost advantage for electric vehicles versus a gasoline car is fast diminishing here in Europe, and I’m really wondering to what degree that will begin to impact sales of EVs,” Saxo Bank’s Peter Garnry told CNBC.

With Europe in the grips of an energy crisis and as the cost for energy continues to soar, the cost of charging an EV may hinder uptake of EVs, Musk has hinted.

Expensive electricity prices

Musk’s comments seem to paint a glaring picture that the rollout of electric vehicles will be hindered by the rise of electricity prices, according to Garnry, head of equity strategy at Saxo Bank. He also said that car manufacturers will face resistance moving forward.

“We see that in the 12 month trailing auto sales figures coming out of the U.S. and Europe — they’re coming down and they’re coming down pretty hard in Europe,” he said.

Garnry also stressed that there are still concerns to be addressed, despite fast-growing EV developments, citing Musk’s comments made during an energy conference in Stavanger, Norway, where the Tesla CEO pledged his support for the continued usage and development of nuclear energy, and the extraction of oil and gas.

“And I think he’s very well aware that you cannot sell a lot of electric vehicles with electricity prices going through the roof right now,” Garnry said. 

During the ONS 2022 Conference in Norway, Musk said that the world still requires fossil fuels to carry civilization forward.

“I, actually, am not someone who would tend to, sort of, demonize oil and gas, to be clear,” Tesla’s CEO said. “This is necessary right now, or civilization could not function.”

“And… at this time, I think we actually need more oil and gas, not less, but simultaneously moving as fast as we can to a sustainable energy economy,” he added.

In addition to oil and gas, Musk also shared his “pro nuclear” status and said “we should really keep going with the nuclear plants,” despite having expressed the importance of renewable energy like hydro, solar, geothermal and wind energy.

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Europe under energy crisis

Europe is currently under dire stress from an energy crisis that spawned after Russia curtailed its gas supplies to the west following the implementation of international sanctions due to its invasion of Ukraine. The crisis and increased electricity prices have raised concerns in some areas that the rising cost of charging an EV could drive customers away.

In the United Kingdom, energy bills are expected to soar by 80 percent after the Office of Gas and Electricity Markets (Ofgem) announced a price hike that would be put into effect on Oct. 1. 

Reportedly, newly appointed British Prime Minister, Liz Truss, will be announcing a support package to help citizens with the cost-of-living crisis.

Rod Dennis, Official British Business Ambassador for the UK said, “Despite recent falls in the price of petrol [gasoline] and diesel, the cost of charging at home is still good value compared to paying for either fuel, but again underlines just how the rising cost of electricity is affecting so many areas of people’s lives.” 

“We’re also aware that public chargepoint operators are having no choice but to increase their prices to reflect the rising wholesale costs they’re faced with, which will heavily impact drivers who have no choice other than to charge up away from home,” he added.

On Sept. 5, the Society of Motor Manufacturers and Traders (SMMT) said that there was a “year-on-year jump” of new registrations for battery-powered EV’s in the UK in August 2022, but the growth is “slowing.”

Garnry warned that there would be “bumps in the road.”

“If you look from mid-2008 to late 2020, that was a 12-year long bull market for intangible driven industries — so software, health care, media and entertainment, etcetera,” he said. 

“Since the vaccines were announced in November 2020, we have seen the tangible world come back,” he added, referring to car manufacturers and commodity companies.

“They sit in the physical world… and we think the next eight years will… mean a lot of positive tailwind[s] for these tangible companies,” he added.