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Tuesday
Jan132015

Oil Price drop kills electric car sales?

Cheap Oil and Electric Cars

 

You are probably aware of the massive drop in the price of crude oil. It started before Christmas and it continues to fall.

This can only mean one thing, electric car sales will plummet, people will start buying bigger cars with bigger engines because petrol and diesel will be dirt cheap. Forever.

We all know that, once the price of oil goes down, it stays down, forever.

Oh wait, I’ve just remembered, no it doesn’t. It goes up again just as sharply, then down again, then up.

 

It’s a highly volatile market which keeps financial journalists busy so that’s good for them.

So why did the price of oil go down?

Oh yes, fracking. Of course, if only the namby-pamby-greenie-weeny-nimbies would allow this government and their mates to frack the hell out of Berkshire we’d have almost free oil and gas forever.

Except of course we wouldn’t, and now it seems even more unlikely.

Here’s an idea.

The tar sands in Alberta, the gas and oil in shale rock thousands of meters beneath the surface, geologists and oil companies have known about that stuff for decades, it’s only recently been financially viable to extract it because the oil price has been so high.

So extract it they did, they had a bonanza! Woop-de-doodie.

Then some chaps in Saudi Arabia noticed a bit of drop in demand for sweet crude (that’s a proper term by the way) and they said, ‘either we turn off the taps and make do with several billion dollars a day less than we’re used to, or we flood the market and put all the tar sands dudes and frackers out of business overnight.’

They did the latter.

It is now economically ridiculous to spend the amounts of money and energy to extract tar sands, fracked oil and all the associated problems that go with this absurd, last gasp effort to keep burning fossils. The fossil companies are moaning, they want more tax breaks or they’ll go out of business. Naturally they have the full support of the public….. not.

And interestingly this massive temporary reduction in the oil price has had no effect on electric car sales, they just keep going up.

It’s still tiny, it’s still a fraction of the total but the increases are in the 100’s of % per year.

Because as anyone with two brain cells is aware, people don’t buy electric cars just because petrol is expensive or cheap. There are hundreds of reasons, the main one being that the technology is more interesting, impressive, reliable and it is possible to make your own fuel.

That’s disruptive, that’s upsetting to the entrenched and well defended monopolies that govern us…. via the governments they pay for.

So I would suggest that electric car sales will not be affected by the drop in the price of oil.

As I always say, electric cars won’t save the world, but they might be pointing in a direction we should all be looking at.

 

 

Reader Comments (9)

Hmmm this isnt entirely convincing! Your conviction that the oil price drop will be temporary suggests that you actually DO think that the price of petrol has an effect on the desirability of electric cars. At all events, it is clear that deflation is taking hold in the developed world. Not good news for paying off those massive debts! More economic crises to come i fancy

January 13, 2015 | Unregistered CommenterWill bick

Pretty good article … just one comment to who's been working to "flood the market". It's the frackers not Saudi Arabia. While Saudi Arabia volume of production has remained relatively flat for a number of years, new fracked production has tried to gain market share in the last few years. The U.S. has gone from being a net importer to an exporter as production volume has more than doubled.

The OPEC group was founded on sharing volume, so they will tend not be very open to giving up market share. Since the global demand is fixed (and shrinking over time) the only market force on the supply-demand curve to move is price. Many players gambled that OPEC would reduce volume to stabilize prices … they have not and instead taken a hands-off approach. This is where Saudi Arabia and partners have an advantage as their productions costs are only $12-$20 (US) per barrel vs. $50-$80 (US) per barrel for fracked production. Tar sands production costs even more at $75-$100 per barrel.

Add in a few countries like Russia and others that use oil revenue to balance their national budgets and things have gotten interesting.

So the price pendulum has swung from one favoring a large number of supplies to one favoring much fewer suppliers. As the suppliers decrease, the price pendulum will swing back the other way to find a new balance. However as often happen the pendulum often over swings before settling to a new norm.

With a big initial swing as we are seeing, it make take some time for the pendulum to slow down. While we don't know what the new number will be, one thing is certain … there will be much volatility for the next couple years.

Meanwhile the sun will keep shining, and the wind will keep blowing. :)

January 13, 2015 | Unregistered CommenterBrian Henderson

U might find this interesting http://www.postcarbon.org/the-oil-price-crash-of-2014/

January 14, 2015 | Unregistered CommenterWill bick

A recent study showed that people saved more electricity if they are told about the environment and money rather than just money. I've yet to switch to electric cars but my next car will likely use less petrol than the current one even if the price of fuel keeps going down.

January 14, 2015 | Unregistered CommenterAndy from Workshopshed

The price difference has been particularly marked here in the US, where road tax is a small part of the price of fuel. We are picking up our first pure electric car (an eGolf) in about 3 hours. (its replacing a 14 year old original Prius). But it is the case, that larger and thirstier cars have had a blip in popularity on these shores.

January 14, 2015 | Unregistered CommenterJeff Del Papa

It would be interesting to know if sales of larger/commercial vehicles in the US increases slightly at the end of each year. There can be tax advantages to making capital purchases if it's been a good year. The alternative to not taking the tax write-off for the vehicle could be to just hand the cash over to The Man®.

While I pretty cynical about the intelligence level of my fellow countryman, it still seems strange for people to rush out and buy super heavy and inefficient vehicles just because there is a dip in petrol prices. The price of liquid fuel is going to rebound long before a new vehicle loan is paid off. I see it as wizard time to take the savings in fuel and put it towards the purchase of an EV or hybrid.

January 14, 2015 | Unregistered CommenterKen Brown

Here is something that I have always wondered. If everyone in the UK had an electric car how much renewable energy could be stored?
Most peoples cars spend 90% of the time sitting outside the house not being driven.
If all the cars were connected to the grid how much energy could be stored.
To me this seems the perfect solution to storing renewable energy.
Can anyone work out the figures. I suppose its just the case of the number of cars times the average storage of electric cars.
The number would be huge I should think.

February 19, 2015 | Unregistered CommenterDavid Hicks

Here is something that I have always wondered. If everyone in the UK had an electric car how much renewable energy could be stored?
Most peoples cars spend 90% of the time sitting outside the house not being driven.
If all the cars were connected to the grid how much energy could be stored.
To me this seems the perfect solution to storing renewable energy.
Can anyone work out the figures. I suppose its just the case of the number of cars times the average storage of electric cars.
The number would be huge I should think.

February 19, 2015 | Unregistered CommenterDavid Hicks

Thanks for sharing this information.It's very helpful with me.
Thanks again!

August 10, 2015 | Unregistered Commenteratv tires

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