The electric car can sink the price of oil up to $15


The report “Riding the Energy Transition: Oil Beyond 2040” has recently been published by the IMF, which analyzes the role of the electric car in the coming years and the impact it would have on the price of oil.

What is striking about this report is that it concludes that in the fast-paced scenario, oil prices could converge at the level of coal prices, about $15 per barrel in the early 2040s.

Losing its exclusivity for motor vehicles, oil could become the new coal, with ample recoverable reserves and elastic demand.

In a scenario where oil loses its role as the main fuel for transportation, according to the report, the price of oil should fall substantially and converge to a level of about $15 per barrel, while today the price of crude oil is around $50.

Sheikh Zaqui Yamani, a former Saudi Arabian minister, commented that “the stone age came to an end not because of lack of stones and the oil era will end but not because of lack of oil”.

In the years of the industrial revolution we have witnessed energy transitions. First, wood sank as the main component of the US fuel base between 1850 and 1895. The proportion of fuelwood in the fuel base went from 90% to 30%, while coal soared from 9% to 65%.

In turn, oil and gas replaced coal between about 1910 and 1955. Over a period of four and a half decades, the share of coal declined from 77% to 28%, while the combined share of oil and gas increased from 9% to 65%.

Oil use per unit of world GDP has also declined by 40%, essentially linearly, since 1980. The International Energy Agency projects a decrease in the proportion of world energy from oil and coal, which will reach 26 % and 25%, respectively, for 2040.

What are the current projections? The next energy transition could occur in the next 10 to 25 years, when electric cars replace motor vehicles as motor vehicles displaced horse carriages a century ago.


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