Phillips 66 (PSX), Valero Energy Corporation (VLO): What If Tesla Motors Inc (TSLA) Took 500,000 Gas-Guzzlers Off the Road?

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Photo credit: Tesla Motors.

Last quarter, Tesla Motors Inc (NASDAQ:TSLA) delivered 5,150 cars, which was well above its expectations of 4,500 deliveries. The company did so by boosting its production rate by 25% to 500 per week. If everything goes according to plan, the company’s deliveries for its award-winning Model S could reach an annualized rate of 40,000 by the end next year, which is nearly double this year’s expected rate. That’s simply stunning growth. However, it’s only the tip of the iceberg for where this company plans to be in the future.

The company has a very long road ahead of it to reach its goal to produce 500,000 vehicles annually, which is the rate CEO Elon Musk believes it can eventually reach. To get there, the company needs to capture lightning in a bottle again and produce a car that can be a mass-market success. That will happen only if consumers can drive a car off the lot in the $35,000 range — something Tesla Motors Inc (NASDAQ:TSLA) believes will be possible in as little as four years. While that’s a bold dream, if Tesla Motors Inc (NASDAQ:TSLA) has taught us anything, it’s that it’s OK to dream. So let’s dream together of a world were Tesla can sell half a million cars each year.

No more pain at the pump?

Americans as a whole are driving less, but we still drive a lot. Last year alone, the average American drove 9,363 miles, which is 7.5% down from the peak in 2004. While there’s no telling how much we’ll be driving by the time Tesla Motors Inc (NASDAQ:TSLA) takes 500,000 gas-guzzlers off the road, we could conservatively assume that each one of those cars would have driven 10,000 miles per year. Even with using 2025 CAFE standards of 54.5 MPG as the average gas mileage of the cars being taken off the road, that’s 183.5 gallons of gas being saved per car.

Overall, that’s a savings of nearly 92 million gallons of gas each year. For perspective, that’s just about a quarter of the 367.08 million gallons of gas Americans use per day. Thought of another way, if gas was $4 per gallon, it would save Tesla Motors Inc (NASDAQ:TSLA) owners a collective $367 million, or about $733.94 per year. Swapping in a more gas-guzzling car would certainly boost the savings, so just think of these numbers as ballpark figures.

In fact, let’s just say that Tesla was able to replace 500,000 true gas-guzzlers and knock off one day’s worth of America’s annual fuel consumption, or roughly shave the demand for a million gallons of fuel per day. Let’s take a look at those numbers.


*Based on an average of 10,000 miles driven and $4 gasoline

How much of a pinch would that be for refiners such as Phillips 66 (NYSE:PSX) or Valero Energy Corporation (NYSE:VLO) ? In 2012, Phillips 66 (NYSE:PSX)’s refining and marketing segment produced $4.5 billion in earnings on $173.3 billion in revenue. Similarly, Valero Energy Corporation (NYSE:VLO)’s total revenue last year was $139.3 billion and its operating income was $4 billion. Clearly, the $1.47 billion in gasoline that Tesla could save each year won’t put either out of business.

Oh, by the way

Further, while taking a million gallons of gasoline per day out of the equation would still have some impact, odds are it would find somewhere else to disappear. In fact, just last quarter, Phillips 66 (NYSE:PSX) highlighted that it had increased its refined product exports to 181,000 barrels per day, or more than 760,000 gallons. By the end of this year it should have the capacity to export 370,000 barrels of refined product per day, or more than 1.5 million gallons. That additional capacity means Phillips 66 (NYSE:PSX) alone could easily export the amount of gasoline per day that 500,000 Teslas would save.

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