x
Breaking News
0

Will Crude Demand Plummet On Electric Vehicle Mandates?

By Ellen WaldCommoditiesAug 09, 2017 05:05
ca.investing.com/analysis/will-crude-demand-plummet-on-electric-vehicle-mandates-200195982
Will Crude Demand Plummet On Electric Vehicle Mandates?
By Ellen Wald   |  Aug 09, 2017 05:05
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Several governments have recently announced long-range electric vehicle (EV) mandates intended to increase the use of electric powered vehicles and decrease the use of internal combustion engines in their countries. These countries include emerging markets like India, to well established European markets like Austria and the U.K.

Here is a rundown:

India: Energy minister Piyush Goyal stated that his goal is for India to only sell electric vehicles by 2030.

United Kingdom: The British government recently announced intentions to ban the sale of all gasoline and diesel fueled cars by 2040.

France: Emmanuel Macron’s government announced that France intends to ban the sale of all gasoline and diesel fueled vehicles by 2040.

China: In September 2016, the Chinese government announced a policy requiring that 8% of all car sales be “new energy vehicles.” The government defined this as either EVs, hybrid cars, or fuel cell powered cars. The mandate was originally intended to begin in 2018 but was pushed to 2019.

Austria: With the most ambitious plan of all, the Austrian Ministry of Agriculture and Environment announced it is considering banning the sale of all non-EVs by 2020.

In the long-term, these mandates have the potential to transform the oil markets (not to mention the equity values of vehicle manufacturers). If widespread adoption of EVs does actually occur, this will clearly depress the value of crude oil. For example, just under 50% of crude oil refined in the U.S. is processed into gasoline for vehicles, according to the EIA. However, do not get excited just yet about a transformation in fuel usage.

The problems with EVs now include: insufficient range, long recharge times, upfront expense, questionable resale value, undetermined lifespan on the battery, and insufficient charging infrastructure on the roads. Innovations and improvements do not necessarily happen because the government mandates it. Oftentimes, government mandates fail to bring technological innovation into existence (see the U.S. fuel-mileage mandates of the early 2000s which have been regularly missed).

However, if, in 10, 15, or 20 years, EVs are as (or almost as) prevalent at these policies hope, crude oil demand will have plummeted. For investors, just the fear of this may be enough to weigh on the price of oil for some time. The notion of “Peak Demand” has taunted oil traders and producers alike for a little over a year, with the possibility that demand for oil may not grow anymore due to transitions to alternative forms of power.

The last couple of weeks have seen much publicity for the future of EVs, between the debut of Tesla Inc (NASDAQ:TSLA)’s Model 3 car and the regular announcements of new EV mandates. That publicity alone makes it hard for the price trend of oil to rise, at least until the hypes over EV and “Peak Demand” subside.

Will Crude Demand Plummet On Electric Vehicle Mandates?
 

Related Articles

Will Crude Demand Plummet On Electric Vehicle Mandates?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

 
Are you sure you want to delete this chart?
 
Write your thoughts here
 
Replace the attached chart with a new chart ?
Post
Post also to:
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
 
Replace the attached chart with a new chart ?
Post 1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email