The rise of electric cars… and consequences on oil price
It’s all about the batteries!
Plug-in cars make up just one-tenth of 1 percent of the global car market today. They’re a rarity on the streets of most countries and still cost significantly more than similar gasoline burners.
Last year EV sales grew by about 60 percent worldwide but, in the next few years, Tesla, Chevy, and Nissan plan to start selling long-range electric cars in the $30,000 range.
Considering a continued 60 percent growth, Bloomberg New Energy Finance (BNEF) found that electric vehicles could displace oil demand of 2 million barrels a day as early as 2023, creating a glut of oil equivalent to what triggered the 2014 oil crisis.
For EVs to achieve widespread adoption, one of four things must happen:
- Governments must offer incentives to lower the costs.
- Manufacturers must accept extremely low profit margins.
- Customers must be willing to pay more to drive electric.
- The cost of batteries must come down.
The first three things are happening now in the early-adopter days of electric vehicles, but they can’t be sustained. Fortunately, the cost of batteries which accounts for a third of the cost of building an electric car is headed in the right direction.
The good news is electricity is getting cleaner. Since 2013, the world has been adding more electricity-generating capacity from wind and solar than from coal, natural gas, and oil combined. Electric cars will reduce the cost of battery storage and help store intermittent sun and wind power. In the move toward a cleaner grid, electric vehicles and renewable power create a mutually beneficial circle of demand.
Excerpts and image from Bloomberg Business, Here’s How Electric Cars Will Cause the Next Oil Crisis, Tom Randall, 25.Feb.2016