Will Electric Cars Destabilize the World? – by David Koranyi (The National Interest – May 29, 2016)


After a deep dive, oil prices are slowly crawling back up on the back of resurging demand from China and India in particular, as well as looming supply shortages from Nigeria to Venezuela. Yet oil markets are in for a rough ride, as uncertainties mount regarding oil’s continued predominance as transportation fuel in the coming decades.

An accelerated adoption of electric vehicles would hasten the end of the oil era, and could cause significant geopolitical turbulence as producer countries heavily reliant on oil revenues will struggle to diversify their economies. We are already witnessing the destabilizing effects of low oil prices in the Middle East, while Russia’s aggressive behavior can also be partially explained by its domestic economic woes.

At first glance, oil producers should not be too nervous. The International Energy Agency predicts that before the end of this decade, we should expect oil prices to rebound in the 80-plus-dollar range, as demand will continue to rise and new sources of supply will need to be brought to production to replace depleting ones.

Around 40 million barrels per day of new crude production will be needed by 2030 to offset declines and meet new demand, according to the consultancy IHS. There is plenty of room for oil demand to grow in emerging economies. India only has seventeen passenger cars per 1,000 people, compared to 540 in Germany.

But what if the transition from the internal combustion engine, the backbone of global oil demand, to hybrid and electric vehicles (EVs) will be faster than expected? What if—similar to the speed with which smartphones spread—EVs will penetrate the vehicle markets sooner and deeper? How will that impact oil demand and producers’ bottom line? How will it affect domestic stability in oil revenue–dependent economies such as Russia or Saudi Arabia?

For the rest of this article, click here: http://nationalinterest.org/feature/will-electric-cars-destabilize-the-world-16387