Oil, your time is running out.
So says Cathie Wood, Founder of ARK Invest, who tells Yahoo Finance that despite recent price gains, crude’s (OIL) long-term future is the same as the dinosaurs who helped create it in the first place.
“We’re having a nice cycle, the economy is starting to rebound from the winter so we will have a pickup in oil demand now,” she explains. “But as EV’s-- electric vehicles-- take off during the next five to ten years, we think oil will be in a secular decline.”
Wood also believes a just-released report by British oil giant BP showing the U.S. has surpassed Russia as the top producer of oil and natural gas combined adds to her argument.
“The productivity of our wells has surprised on the high side of expectations, so our production has stayed up much higher than most people had anticipated,” she notes. “So we’ve got productivity and technology working for us here, and I think it helps cement the long-term decline in oil prices.”
On the technology side, Wood feels Tesla (TSLA) will be leading the charge that will help bury oil.
“Tesla is making the best car out there in the premium sedan sector,” she says. “They will have the best SUV later this year and then the Model 3, which will be the more affordable model. Americans have always been very performance-oriented and they’ll go for the best car. And in the case of Tesla, not all EVs and certainly not hybrids, the best car will win.”
(Note: Wood’s firm is a Tesla shareholder)
However, Yahoo Finance Columnist Rick Newman isn’t sold on that argument.
“Electric vehicles have an infinitesimal share of the market right now and most projections say it’s only going to be a couple of percent at most by 2025,” he points out. “Other technologies-- whether it be natural gas or hydrogen or whatever are still in development-- and it’s just not clear that electric vehicles will be the technology of the future.”
In the meantime, Newman says Americans will continue to base their car buying habits on how low oil prices have impacted what drivers pay at the pump.
“We’ve seen that in spades this year, he explains. “The hottest sellers are big SUVs. Who would have thought? We heard about this big transformation over to more fuel-efficient cars. But car buyers are so shortsighted-- gas is cheap today so I’ll buy a gas-guzzler today.
And Wood sees no reason to think the price of oil-- and thus gas prices-- will go up anytime soon.
“We did see $40 (a barrel), I think we will go below $40,” she says. “So lower lows.”
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