How Can Electrical Cars Impact on Oil Prices

Document Type:Essay

Subject Area:Business

Document 1

As a result, the stakeholders in the oil and petrol industry have experienced a decline in demand for oil and oil products. This paper discusses the background of the electric car industry and the electric vehicle market demand. Additionally, the paper discusses and compares the electric car sale and production as well as the oil prices to determine the effect of electric cars on oil prices. Table of Contents Abstract 2 Introduction 4 Electric Vehicle Market Demand 4 Electric Vehicle Sale and Oil Prices Forecast 4 Conclusion 4 References 4 Introduction The electrification of vehicles is regarded as a crucial measure in reducing greenhouse gas emission by automobiles in the transport sector, minimizing reliance on oil and oil products for countries that import oil as well as mitigation of the environmental impact of ICE vehicles.

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Hence, electric vehicles such as the plug-in hybrid vehicles and the all-battery vehicles are now being manufactured by car manufacturers such as Tesla, and the electric car industry is experiencing a rapid expansion. Although electric cars comprise less than one percent of the global market share, the sales are expected to grow rapidly with time. A significant effect of electric vehicles is deemed to be experienced in the oil and oil products market with the various participants predicting a decline in oil demand and drop in oil prices (Zhang, Zhong, Geng & Jiang, 2017). Various factors such as the need for clean forms of energy and deteriorating oil reserves has contributed to the increased demand for electric vehicle manufacture and sales. The demand for oil prices is expected to decline although the energy requirements in the world may increase with population growth.

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The expected decline in oil prices due to increased demand for electric cars has resulted in some participants in the oil industry resorting to other forms of energy production. As a result, governments have established initiatives to curb air pollution due to emissions from ICE vehicles and automobiles leading to success in the Electric Vehicle industry (DiChristopher, 2017). According to Albanese, Ciriminna, Meneguzzo and Pagliaro investigating the impact of electric vehicles on the power market found out that running electric cars in Europe cut down Global Warming Potential (GWP) by 30 percent and lowered 50 percent of the emissions by ICE vehicles (Albanese, Ciriminna, Meneguzzo & Pagliaro, 2015). These factors have contributed to a significant increase in demand for electric vehicles. Electric Vehicle Market Demand The demand for electric vehicles has increased over the years and also predicted to experience rapid growth in the future.

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Zhang, Zhong, Geng and Jiang used the univariate and multivariate time series models to forecast electric vehicle consumption found out that the electric vehicle penetration will rise to 62 percent in the United States of America by the year 2050 (Zhang, Zhong, Geng & Jiang, 2017). org/10. 1371/journal. pone. g006) The electric car sales are expected to grow rapidly to over one million units in China. The rapid growth is also expected in emerging markets as well as grown markets such as Europe and America. The electric cars are a major factor that has caused a significant decline in oil prices over the past few years and also a continued decline is foreseen in the future. Although the manufacture of electric cars requires oil and oil products in their manufacture, the demand will not make a significant impact on the expected decline in oil and oil products.

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According to Lynch, a petroleum economics and energy policy analyst, the production of electric cars has caused a significant decline in oil prices. “The oil prices are expected to drop by $10 per barrel over the next six to eight years,” he wrote in his article on Forbes Magazine (Lynch, 2017). The alternative energy sources have attracted more investors withdrawing resources from oil industry hence a decline in oil prices. Oil and other oil products are required in the manufacture of electric cars may boost the oil sales, and some optimists in the oil industry argue that this will keep oil prices balanced. However, these factors will not make a significant impact on the use of oil to the extent of sustaining the prices (Albanese, Ciriminna, Meneguzzo & Pagliaro, 2015).

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Other factors such as GDP and increased efficiency of car engines will see the demand for oil go down. Below is a graphical representation of the oil demand in the past 11 years and the forecasted oil demand in the next 13 years, by the year 2020 to million barrels per day. Figure 4: Past & Forecasted Global Oil Demand From the graph, it is evident that the oil prices will have dropped to less than 1 million barrels a day implying that the electric cars significantly affect the demand for oil and oil prices. , Ciriminna, R. , Meneguzzo, F. , & Pagliaro, M. The impact of electric vehicles on the power market. Energy Science & Engineering, 3(4), 300-309. html Oil Majors Can No Longer Ignore the Electric Car Threat | OilPrice. com.

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