The huge amount of media coverage that the unveiling of the Tesla Motors Inc TSLA Model 3 received has some traders wondering how much of a threat the new wave of electric vehicles pose to U.S. gasoline demand. According to Goldman Sachs analyst Neil Mehta, despite the increasing presence of electric vehicles, U.S. gasoline demand will continue to grow at a healthy pace at least through 2020.
“We expect U.S. gasoline demand to grow by 1.9% in 2016, above the five-year avg. of 0.4%, spurred by low oil prices, a continued shift into SUVs and steady US economic growth—translating into 2.3% growth in vehicle miles traveled vs. the five-year avg. of 1.2%,” Mehta explains. He adds that Goldman forecasts compound annual gasoline demand growth of 0.4 percent through 2020.
Although a mass market automobile shift to electric vehicles would certainly impact gasoline demand at some point, Mehta says it’s unlikely that electric vehicles will make a meaningful impact for at least seven years.
“Our new deep dive work suggests that there is a limited impact from electric vehicles before the middle of the next decade given that 3.6 million EVs are needed (vs. 0.2 mn in 2015) to lower US motor gas demand by 1%,” he concludes.
Mehta lists five stocks that are best-positioned to benefit from the surge in U.S. gasoline demand in coming years:
- Valero Energy Corporation VLO
- Marathon Petroleum Corp MPC
- PBF Energy Inc PBF
- Goodyear Tire & Rubber GT
- Green Plains Inc GPRE
General Motors Company GM is set to begin shipping its answer to the Model 3, the Bolt EV, later this year.
Disclosure: the author holds no position in the stocks mentioned.
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