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Business Unusual

Have we reached Peak Petrol?

28 April 2021 7:15 PM

It appears we have and hopefully South Africa can move away from petrol too.

The good news is that the International Energy Agency, an autonomous intergovernmental organisation that has been tracking energy issues since the oil crisis in 1973 noted that while the 2021 increase in oil consumption would be more than the drop in consumption in 2020, petrol consumption probably peaked in 2018. It held steady in 2019 and dropped in 2020.

While, in time, you might assume it will rise beyond the 2018 high, they expect it will not reach the 9.33 million barrels per day again.

The reasons include continued increases with fuel efficiency, a trend to more remote working and telecommuting and the increase in the sale of electric cars.

Tipping point

It is surprising that the relatively low number of electric car sales would suggest we have reached a tipping point but it is not only the sales that will drive sales. Manufacturers are shifting their focus to electric models and in the next decade will phase out the availability of internal combustion engines.

The global leader, Norway, may be a relatively small market with under 5 million cars, a far cry from the over 275 million cars in the US. But Norway has offered a very compelling list of incentives to make electric cars more desirable. No sales tax, no vehicle registration fees, no toll fees, no parking fees and permission to use the bus lanes.

They hoped to reach 50 000 electric vehicles by 2017 and have managed to overshoot that to have almost half a million last year. While still a minority of the cars on the road, the sales last year had over 50% of new cars being electric and if you include hybrids over 70% were not combustion only models.

They don’t offer all the perks anymore as the shift now seems to be well under way and the prices and running costs for electrics making it not only the better option, but the cheaper one too.

Crazy that a country that made its money from oil would be the global leader to turn its back on it too.

Emerging markets

For volume though, China is in a league of its own with more electric cars than all of Norway combined. It has the largest fleet of electric cars in the world and the largest fleet of cars overall, but is only a little above South Africa with cars per capita. South Africa is 174 vehicles per 1 000 while China is 204. The US remains the car champs with the 276 million size fleet making it 842 cars per 1000 citizens. Considering those under 18 (or 16 in some states) can’t drive, that means almost everyone owns a car in the US. You might recall the odd sight of Americans collecting food parcels via drive throughs and many Covid testing centres also being drive throughs.

One of the US government's undertakings for the current presidential term was to make all federal vehicles electric, that alone is about 645 000 vehicles.

Where is South Africa?

South Africa has a little under 13 million cars just a tiny fraction are electric. But the option for South Africa to expect locals to switch to electric is not the best way for us to proceed.

South Africa has a major issue with how poorly we drive with the relatively small fleet already with over a million incidents per year.

It would be better for South Africa to work to move drivers into public transport and for that to be almost all electric. Urban rail already is but we should look to invest more in electric rail transport in major urban areas. In part because the road networks are already becoming too congested and causing productivity losses while residents are stuck in traffic.

Uganda’s capital Kampala lacked road infrastructure as it expanded its vehicle numbers clogging the roads and choking residents with diesel fumes. They have invested in a state enterprise to build the continent's first electric buses. While many components are still sourced from countries like China to supply the batteries, the investment will not only allow cleaner air and quieter streets, but the growth of Uganda’s transport and battery industry will benefit it as it expands its renewable energy generation and storage journey.

A carbon tracker website lists how much land is required to replace fossil fuels with renewables and for most African countries it is under 0.1%. South Africa uses a lot more energy than the rest of Africa and so we might need more but still less than 1%.

Start with Public transport

For South Africa to move all large capacity busses as they are due for replacement to electric would provide an incentive to set up the basic charging infrastructure including converting the long distance bus routes to electric with suitable options to either switch batteries or use the high speed charging.

Offering exemptions on taxes for locally assembled or produced vehicles could drive the vehicle manufacturing sector as well as speed up the adoption. Considering how much was spent and how little little recovered with the Gauteng e-tolls, a similar investment of R38 billion will not only have long term climate change benefits but help build a new industry that will continue to grow.

If Norway had the best policy and South Africa is yet to get off the mark, you might think we are among those being left behind, but at the moment it appears Australia has that title.

While also being a relatively small total vehicle market with just under 20 million vehicles it is a very high 750 per thousand ownership. It has a tiny fleet of electric vehicles but rather than looking at incentives for making the switch, the Victoria State government is considering adding a tax for those looking to go electric. Their reason - someone must pay for looking after the roads. Looking to tax less than one percent of the road users for using something that 99% of other road users don’t need to pay is crazy.

So for South Africa to find the sweet spot at a time when the petrol price is at a record high should look to see how the taxi industry can be converted to electric. For some Chinese manufacturers the cost of a new 26 seater all electric bus costs about the same as a Toyota Quantum. Offering taxi’s free charging for the vehicles at set charging stations will not only allow owners and drivers to earn more and not have to take as many risks, but offer commuters a more affordable way to get to where they need to be.

Poll: It appears that while most would switch to electric some will find it hard to give up on fuel.

South Africa has marked 27 years since our relatively peaceful revolution to democracy. How long before we are ready to stage the next one?

28 April 2021 7:15 PM

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