Electric car driving towards a sustainable future with solar panels and wind turbines.

Electricity vs. Oil: How the Renewable Revolution Will Power the Future

Rhea Morgan in Climate & Environment August 2025 • 4 min read.

"Discover how the shift from oil to electricity, driven by electric vehicles and renewable energy, is reshaping the global energy landscape."

The idea of comparing oil and electricity might seem odd at first glance. They appear as distinct forms of energy, operating in separate spheres, save for a few instances where oil is still used to generate electricity, such as in Saudi Arabia. Initially, most people acknowledge oil's significant dominance in meeting global energy demands. Electricity currently accounts for less than 20% of final energy consumption worldwide, a figure dwarfed by oil's share.

However, oil's long-held supremacy is facing unprecedented challenges. While Big Oil remains a powerful industry player, its relative influence is diminishing. The once-steady growth in oil demand is faltering, while electricity demand is surging at an accelerated pace. This trend suggests that electricity's share of global energy consumption could equal or even surpass that of oil by 2040, if not sooner. In several countries, this transition is already underway. Consequently, some experts believe that oil's peak days are behind it.

This shift is driven by three key factors: the increasing competitiveness of electric vehicles (EVs) and electrified transportation, the global push to reduce carbon emissions through the adoption of renewable energy sources, and growing concerns among investors and insurance companies about the financial risks associated with climate change.

Why the Future Favors Electricity

Electric car driving towards a sustainable future with solar panels and wind turbines.

Several converging trends indicate a significant shift in the energy sector, with electricity poised to play a more dominant role. These trends are gaining momentum, irrespective of political viewpoints, and will not be significantly affected by fluctuations in oil prices. The future of energy is steadily moving towards electricity, increasingly generated from zero-carbon renewable resources.

One compelling sign is Saudi Arabia's Sovereign Wealth Fund's investment in Tesla, acquiring approximately 5% of the company. This move raises the question: Why would the world's largest oil exporter, whose economy is deeply rooted in oil, invest in an American EV manufacturer? The answer lies in recognizing the long-term potential of electric vehicles and the need to diversify investments.

Electric Vehicles (EVs): EVs are becoming increasingly competitive, reducing the demand for gasoline and diesel, which cuts into the most profitable segment of the oil industry.
Carbon Emissions Reduction: The global economy is shifting towards low-carbon energy resources, driven by the need to reduce carbon emissions. Renewables are becoming more abundant and cheaper.
Investor Concerns: Investors and insurance companies are starting to reduce their exposure to climate change risks, which negatively impacts businesses with a heavy carbon footprint.

Traditional auto companies like General Motors (GM) are also recognizing this shift. They have belatedly embraced EVs and autonomous EVs (AEVs). Over the past few years, GM, Ford, and others have invested heavily in ride-hailing businesses. For example, GM invested $500 million in Lyft, followed by $581 million in Cruise Automation. In May 2018, Soft Bank's Vision Fund announced a $2.25 billion investment in GM's AEV efforts. This interest in AEVs reflects a broader understanding that automakers are transitioning from simply selling cars to providing transportation-as-a-service.

The Rise of Renewables and the Future of Energy

These trends are collectively reshaping the energy landscape. While oil will continue to be used in various applications for years to come, losing a significant portion of the passenger vehicle transport market will diminish its overall importance. Conversely, electricity's role is expanding, driven by the increasing adoption of renewable energy sources. The future of energy is undoubtedly leaning towards electrification and sustainability.

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Everything You Need To Know

How does the increasing competitiveness of Electric Vehicles (EVs) impact the dominance of oil in the energy market?

The rising competitiveness of Electric Vehicles (EVs) is a major factor challenging oil's dominance. EVs directly reduce the demand for gasoline and diesel, which are critical for oil's profitability. As EVs become more affordable and efficient, they are expected to capture a larger share of the passenger vehicle market. This transition diminishes the importance of oil in the transportation sector, a key market for oil consumption.

What are the key drivers behind the shift from oil to electricity in the global energy landscape?

The shift from oil to electricity is primarily driven by three factors: the increasing competitiveness of Electric Vehicles (EVs), the global push to reduce carbon emissions through renewable energy, and the growing concerns of investors and insurance companies about climate change risks. The adoption of Electric Vehicles (EVs) reduces oil demand, while the expansion of renewable energy sources like solar and wind provides a sustainable alternative to fossil fuels. Investor concerns lead to reduced exposure to businesses with high carbon footprints, accelerating the transition away from oil.

Why is Saudi Arabia's Sovereign Wealth Fund's investment in Tesla significant in the context of the energy transition?

Saudi Arabia's investment in Tesla is significant because it represents a strategic move by the world's largest oil exporter to diversify its investments and recognize the long-term potential of Electric Vehicles (EVs). This demonstrates an understanding that the future of transportation is shifting towards electrification, driven by factors like Electric Vehicles (EVs) becoming more competitive and the need for carbon emission reduction. This investment suggests a proactive approach to the energy transition.

How are traditional auto companies like General Motors (GM) adapting to the rise of Electric Vehicles (EVs) and what does this signify?

Traditional auto companies such as General Motors (GM) are belatedly embracing Electric Vehicles (EVs) and Autonomous EVs (AEVs). GM, Ford, and others are investing heavily in ride-hailing businesses and AEV development. For example, GM invested in Lyft and Cruise Automation. This shift indicates that these automakers are transitioning from solely selling cars to providing transportation-as-a-service. This represents a broader understanding of the changing market dynamics, where the focus is shifting from owning vehicles to utilizing them through services, accelerating the shift from oil.

In what ways are investors and insurance companies influencing the decline of oil's influence in the energy sector?

Investors and insurance companies are increasingly reducing their exposure to businesses with a heavy carbon footprint due to the growing financial risks associated with climate change. Companies tied to oil, such as those involved in fossil fuel production and refining, face increased scrutiny and potential financial losses due to climate-related risks. This impacts their market value and access to capital. As a result, these financial entities are incentivizing the shift away from oil and toward sustainable alternatives like renewable energy and Electric Vehicles (EVs).