If you told us a decade ago that electric and hybrid cars would account for 10% of the registered vehicles on UK roads, we probably would have been sceptical. However, this figure released in 2020 shows that the electric vehicle revolution is well underway.
These sustainable alternatives are becoming more affordable and widely available. More and more car manufacturers are bringing out sustainably powered vehicles to meet the rising demand for these eco-alternatives.
To help to combat climate change, the hope is that all gasoline, petrol and diesel vehicles will eventually be phased out, replaced by sustainably-fuelled alternatives. The government plans to ban the sale of all new petrol and diesel vehicles by 2030, meaning that these oil-fuelled vehicles will depreciate, causing more people to purchase electric cars. The question is — what will this mean for the oil industry?
The refinement of oil
Oil is the most actively traded commodity and is incredibly versatile, refined to create heating oil to warm our homes, to make petroleum to fuel our cars, to make jet fuel so that we can travel, and is used in the manufacturing of many everyday products.
Oil is a fossil fuel, and though we are reliant on them for the majority of our energy needs, this will have to change. They will eventually run out and are one of the biggest contributors to climate change.
It is apparent that a shift away from fossil fuels towards greener, more sustainable energy sources is the goal, but this will be a gradual change which will require time and a global adaptation to accept alternatives.
A short-term solution to help combat the detrimental effects of oil refinement on the climate, was to place restrictions on the process to reduce emissions. These new rules required refiners to cut the amount of sulphur used in many of the fuels that they produce. This has caused many refiners to turn to light sweet crude oil. This grade has a naturally lower sulphur content than alternatives and therefore, releases fewer contaminants into the air that we breath.
In the near future, experts predict that the oil market will benefit greatly from development of weaker economies, particularly rapidly expanding Asian economies. As a result, oil trading on Plus500 for example, through a financial derivative, will still be viable and could prove to be a profitable investment, if you take the time to conduct sufficient research and make strategic decisions.
As smaller economies grow and become more prosperous, more individuals who reside there will be able to purchase their own vehicle. In fact, the International Energy Agency’s World Energy Outlook (WEO) propose that the total cars owned in the world could double in the next 20 years — reaching 1.8 billion vehicles.
If the experts are right and this vehicle growth comes to fruition, it is likely that the world’s demand for oil could also double within the next 20 years, which is great news for oil traders, but not so great for the environment.
The majority of this growth is likely to come from developing countries. Therefore, though the number of electric cars will also increase significantly, it is likely that they will still only account for less than a tenth of the world’s vehicles.
The rise of electric vehicles
Although electric vehicles are not likely to take over the world in the next 20 years, their effect on the oil industry in the more distant future is inevitable. Electric vehicles may be becoming a more common presence on our roads, but our petrol and diesel vehicles are also working harder to become more environmentally friendly.
The efficiency of these oil-powered vehicles has improved significantly in the last decade and is only likely to continue to improve as long as they are permitted to be sold. A more efficient vehicle will mean that it consumes less fuel, which could subsequently decrease the demand for oil.
It is the hope of environmental experts that electric vehicles will eventually contribute to the demise of the oil industry. However, because of their hefty price tags and the fact that the world is currently so heavily reliant on oil-powered vehicles, they are likely to still only account for a small percentage of the world’s total vehicles in 2035.
For the next 20 years at least, electric vehicles are very unlikely to affect the oil industry. Although these sustainable vehicles are becoming more prominent on the roads in more developed countries, it is the growth of lower economically developed countries that should continue to fuel the industry for the next couple of decades.