oil price

A lot has been written lately about the fall in oil prices, how this will effect the World’s economy and the Global impact of cheaper oil. But will a lower oil price effect the roll out and development of Electric Vehicles?

Many analysts are predicting that a lower oil price will slow the growth of the EV market but there are a number of arguments for and against this claim.

While a short term fall in prices at the fuel pump may mean the decision to change a family car is postponed the advantage to an EV owner is that they are not left open to regular and big fluctuations in fuel price.

In the USA a number of analysts have been quick to site the falling sales figures of vehicles such as the Chevy Volt and Toyota Prius. Neither are fully electric vehicles, they are hybrids, and both manufacturers are due to update these models in the coming months. Falling sales figures can be indicative of a number of different reasons including outdated models.

It is interesting to note that sales of battery electric vehicles (pure electric vehicles) are still on the rise and, as we noted in an earlier posting, 2014 was a watershed moment for sales, which increased dramatically.

Comparisons have also been made about fuel economy. A study in the USA found that driving a Tesla Model-S as your primary mode of transport rather than a conventional 24-mpg car would save the owner $160 per month in fuel costs. That applies if petrol was at $4 per gallon.

Car Petrol widthWith oil prices falling and petrol now around $3 per gallon in the USA that saving reduces to $110 per month (almost £1,000 per year). Still an excellent saving with the added benefits of excellent driving experience and zero tailpipe emissions.

Another area analysts have hit on is power generation. Falling oil prices may slow the development of renewable energy production and development.

However, this view is also influenced on how long ‘cheap oil’ will continue. For the Oil Majors pulling out of the North Sea, for example, the returns on new investment in renewable generation may outweigh returns on oil exploration. This is helped by the UK and many other EU nations setting targets for renewable energy power generation.

The Department for Energy and Climate Change recently published figures showing that coal-fired energy production was down in Quarter 3 of 2014 by 11.5TWh compared to the same quarter of 2013. Energy generated from renewable sources was up by 2.6TWh in the same period.

In a similar way the recent consultation on London’s proposed new Ultra Low Emissions Zone show a move in thinking towards further limitation of air pollution. This should promote the economics of using EVs in the centre of our cities especially as taxis etc will not be exempt (as they are for the Congestion Zone)

One more factor to consider is tax revenues. A large proportion of the amount paid at the pump is tax. Will the treasury need to consider increasing fuel taxes to recover lost revenues thereby limiting any savings for drivers?

In conclusion while there may be a short to medium term dip in oil prices the long-term viability of EVs should not be in doubt.

If the benefits of EVs are considered fully, such as better air quality, lower noise pollution, smaller maintenance costs, reliability of fuel supply and improved driving experience to name just a few, there is no reason why the switch to electric would be held back.

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