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Low Oil’s Effect on Electric Vehicles

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It’s been a busy week on the electric vehicle (EV) front. Barely a day has gone by without headlines or even breaking news over stories ranging from Tesla’s production of its first affordable Model 3 to Volvo’s sensational claim that it will no longer offer combustion-only engine models after 2019. Not to be outdone, France’s new President Emmanuel Macron pledged that by 2040 no new vehicle will be powered in any way by fossil fuels.

Judging from the interest and hype, one would be inclined to think that the gasoline pump is about to be replaced by the electric cord.

A more thorough peek at the emergence of electric vehicles shows that they are still a long way off from displacing the dominance of the internal combustion engine and the irony is that as long as oil remains in high supply, short of market distorting government subsidies and regulations, affordable gas prices will continue to diminish the appeal of the electric vehicle.

Lost in EV-mania headlines is the reality that most drivers do not currently own or drive an electric or hybrid vehicle, despite the fact they’ve been around some twenty years, while mainstream electric vehicles have been offered through Nissan, BMW, Tesla and Ford since at least 2010. As such, sales and adoption of these new powered options have been sluggish at best. This is no coincidence. The practicality of combustion engines over EVs are a no brainer for consumers, who are now seeing new vehicles produced with remarkable fuel efficiency ratings coupled with lower gas prices which appear to be staying with us for the next few years. Considering the high cost of purchasing EVs, even with massive taxpayer-backed subsidies, a more fuel efficient, lighter vehicle seems to be winning the day, hands down.

Of course, blocking combustion engine sales, imposing onerous taxes on fuel or discouraging or punishing capital investments in traditional oil and gas production could (and is perhaps intended to) do to oil what OPEC cannot do – throttle back on production and create a global shortage in oil, artificially raising energy prices.

Whatever the intent of global policymakers, one thing is for sure – the ability to choose the mode of transportation that best suits our diverse and eclectic needs, may one day be decided for us. Enjoy the driving experience while you can.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded tomorrowsgaspricetoday.com to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.

Oil At A Crossroads
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