How Electric Vehicles Can Sustain As Oil Prices Plunging?
Published on : Sunday 19-04-2020
As the world is undergoing a global pandemic, the Oil industry seems to be affected more. The oil market crashes below $19, falling to an 18-year low. In the US, oil prices dipped another 8% two days ago, with an 18-year low of $18.27 a barrel. According to reports, U.S. West Texas Intermediate crude down 6.6%, or $1.42, to settle at $20.09, its lowest level since February 2002. Now, investors are worried about weak oil prices that could impair the advantages of electric vehicles over the gasoline-powered version, particularly in the U.S.
As global electric vehicle sales already look set to crash this year due to the coronavirus pandemic, lower oil prices could weaken the comparative advantages of electric vehicles over standard combustion cars. This may affect deeply the U.S. EVs market, but may not be similar when it comes to the world’s two biggest EV markets, China and Europe, reports noted.
Just a year ago, it was expected that the passenger vehicle sector represents only about one-quarter of the oil demand barrel, as the sector receives a noteworthy amount of attention from some governments and the media. And this was largely due to a rapid transition from conventional oil-powered cars to electric vehicles.
For 2020, industry experts predicted that EVs will move from the margin of the global auto market to its fast lane, as battery pack prices fall, driving ranges extend and charging infrastructure becomes more sophisticated and widespread. But the COVID-19 pandemic outbreak and its economic impact restricted the EV market from a good start. Now reports expect global EV sales of 1.3 million units in 2020, a sharp drop from a record 2.2 million units sold last year.
The pandemic has also caused a decline in oil prices, with international benchmark Brent crude fell 8.7% to settle at $22.76 per barrel, a price last seen in 2002. The rapid crash in the oil market reflects a realization as the OPEC+ production cuts expire. Starting April 1, the 14-member cartel and its allies have been able to pump as much oil as they please, and Saudi Arabia is among the nations that have pledged to ramp up its production.
On the other hand, Crude soared to $28.34 a barrel on April 3 after US President Donald Trump signaled Saudi Arabia and Russia would make massive production cuts. After his Tweet where he expects Saudi Arabia and Russia will slash output by between 10 million and 15 million barrels per day, US oil prices soared as much as 35% to $27.39 a barrel.
According to UBS, the EV market has been weak after a subsidy cut in the middle of last year, but their data reveal a two-month backlog for Tesla, which has just entered the Chinese market.
Moreover, for Europe, which is on the way to become the biggest driver of electric vehicles in the next two years will be carbon dioxide compliance that requires the auto industry to lower CO2 emission to 95g in 2021 from over 120g in 2019, UBS noted.
So, as the effects of COVID-19 continuing to weigh on global demand, going back on track will take longer for the EV market.
