Cheap oil will threaten electric vehicles?

The scenario seems feasible where cheap oil could bring great turmoil globally and of course to electric vehicles. And yes! A trivial single-celled organism was enough to plunge the planet into an unprecedented state.

The automotive industry is estimated to be going through an extremely difficult year, even if the most optimistic scenarios for the pandemic course are in place. But one parameter comes to turn upside down in the evolution of things as planned for some time.

Electric vehicles are the new big leap of the automotive industry where their future looks bright. The precipitation of oil prices, however, was a scenario that not everyone would want in the research and development departments of electric vehicles.

In US, the fall in unleaded is significant and in combination the fall in liquid fuels in other more cumbersome markets has brought the price of petroleum products into a state 20 years ago.

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Consumption worldwide before the crisis was about 100 million barrels per day. Cars with 22 million barrels and trucks along with planes are more than half that consumption. The huge drop of about 30 million barrels in the crisis brought all this chaotic situation to the price of oil.

cheap oil electric vehicles

What the coronavirus crisis has clearly shown this time is that the oil market is so vulnerable and without resistance that if demand declines again, prices will fall dramatically. A reduction that does not need with another one pandemic to be done but in a prescribed way: the prevalence of electric cars.

Many electric vehicles mean a lot of oil on the market, i.e. low price of liquid fuels. And now that we’ve even tried negative values due to coronavirus, we now know it’s done. Especially when weak OPEC has no serious effect on the market to curb prices.

More problems

But electric cars have other enemies to deal with beyond cheap diesel. The deep crisis that has hit all companies leads them to revise the development programmes of the new electric models.

Electric vehicles still need a lot of money to produce, money that with this year’s recession probably won’t exist. Their sales also depend heavily on state aid and it remains to be seen which countries under this new crisis will give money to strengthen their market, particularly in Europe and the US.

Also, the cost of electric vehicles at fast charging stations is very high, and even in the IONITI network is charged expensively. On the other hand, natural gas remains a very tough opponent in terms of cost-effectiveness.

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Only in the US is the low price of petrol capable of affecting sales of electric models and delaying developments in this sector in the medium term, however. Europe has already set its carbon emissions target and high fines.

And China has as a strategic decision its global dominance in the electric car sector in the coming decades, so it centrally strengthens the transition to them. Prices below $40 a barrel do not make any significant difference in the final purchase of the price of gasoline for the consumer in China, due to taxation, so it is not particularly important for this market that the big drop is happening around the world.

Also, battery prices in electric vehicles have fallen dramatically, and this will probably continue to happen in the future. Put simply : electric cars came to stay, and be ever more affordable and more functional. But it might take a little longer to get to their appointment.

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